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Tag: asset location
Transferring Assets is Easier Than You Think
In my experience, most people are reluctant to speak to a new advisor. Often, the hesitation is rooted in logistics: the obligatory transition process involving opening accounts and selling their assets sounds daunting. As part of our Hillfolio service level, we’ve built out a sweet start-to-finish process of setting up an account, approving asset transfers, and, most importantly, setting up a monthly contribution. It generally takes about 25 minutes – less time than it takes to watch an episode of your favorite Netflix show. You can set up your account securely and seamlessly from your phone or with a couple clicks of your computer mouse. We are always here to make this process feel effortless for you, every step of the way.
The process boils down to these 4 simple steps
- Answer a few straightforward questions so we can understand your current situation and future goals,
- Choose the account(s) you want to open,
- Electronically sign a form that gives us permission to transfer your assets into a low cost globally diversified portfolio of nearly 13,000 companies,
- Set up a monthly contribution that aligns with your budget and goals,
No paper. No 800 numbers. No sales gibberish. No hidden fees. We’ll also set you up with our app so you’ll get a notification when we rebalance your portfolio (at no extra charge).
Ready to talk? Just pick a time on this calendar.
Tax-Wise Planning Never Goes Out of Season
There are many aspects of wealth management we cannot control. Tax codes evolve. Global events come and go. The markets will go up and down. By carefully minimizing taxes due, we can exert an important degree of control over maximizing end returns – the kind you get to keep as your own.
It starts with our annual tax packets. Each year, we aggregate our clients’ Form 1099s from Schwab, and deliver them to their tax professionals for timely and efficient tax-filing.
That’s just one small thing. We are working all year round to help our clients keep a lid on their taxes due. Below are additional examples:
- Asset Location: Locating the most tax-efficient holdings in taxable accounts, and the least tax-efficient holdings in tax-deferred or tax-free accounts, to minimize a portfolio’s overall taxes due.
- Tax-Loss Harvesting: Acting on opportunities to reduce taxes through tax-loss harvesting when appropriate.
- Tax-Managed Funds: In taxable accounts, using tax-managed funds whenever possible, to reduce the capital gains and dividends that fund managers must pass on to shareholders.
- Tax-Favored Accounts: Helping clients establish tax-favored IRAs, 529 plan accounts, Healthcare Savings Accounts (HSAs) and similar accounts as appropriate.
- Charitable Giving: Helping clients shift their tax-wise charitable giving plans following the Tax Cuts and Jobs Act of 2017. For example, implementing Donor Advised Funds and Qualified Charitable Distributions when appropriate.
- Estate Planning: Collaborating with clients’ estate planning and insurance professionals to consider advanced planning strategies for minimizing and covering taxes due upon estate transfer.
So, this spring – or any time of year – let us know if you’d like to explore how you might increase your overall wealth by decreasing your taxes due.
It’s Tax Time: Do You Know Where Your Assets Are?
Here’s another idea to consider as you embark on a fresh start in 2017: In financial jargon, what you own is sometimes referred to as asset allocation. But what about where you own what you own? That’s called asset location. It’s about deciding whether to locate your stocks, bonds and other holdings in your taxable or tax-sheltered accounts, so we can maximize your portfolio’s overall tax efficiency.
Unfortunately, compared to asset allocation, asset location is less familiar to most investors. That’s too bad, because a little bit can go a long way toward minimizing some of the sticker shock you experience when your Form 1099s start rolling in, revealing your annual taxable capital gains and interest earnings.
How far can it take you? In this related Illustration of the Month, Nerd’s Eye View’s Michael Kitces estimates it can bring you up to 0.75% of economic impact to your bottom line.
How Does Asset Location Work?
The general rule of thumb is to:
- Place your least tax-efficient holdings in your tax-sheltered accounts, where you aren’t taxed annually on the capital gains or interest earned. Think bonds, real estate and tax-inefficient equities such as emerging markets.
- Place your most tax-efficient holdings in your taxable accounts – such as the rest of your stock holdings.
- In your taxable accounts, invest in low-cost evidence-based funds that are deliberately managed for additional tax efficiencies. (Start by looking for “tax managed” in their fund names and prospectuses.)
Advisor to Assist
It makes intuitive sense that, by locating your most heavily taxed investments within your tax-sheltered accounts, you can minimize or even eliminate their tax inefficiencies as described. But it’s not as easily implemented as you might think.
First, there is only so much room within your tax-sheltered accounts. After all, if there were unlimited opportunity to tax-shelter your money, we’d simply move everything there and be done with it. In reality, challenging trade-offs must be made to ensure you’re making best use of your tax-sheltered “space.”
Second, it’s not just about tax-sheltering your assets; it’s about doing so within the larger context of how and when you need those assets available for achieving your personal goals. Arriving at – and maintaining – the best formula for you and your unique circumstances involves many moving parts with judgment calls and tradeoffs to consider, and evolving tax codes to remain abreast of.
Ready To Get Located?
It’s common for your assets to wander far and wide over the years, as you accumulate regular accounts, retirement plan accounts and financial service providers galore. Proper asset location often gets lost in the shuffle, and can result in your paying more than you need to on your income taxes. If you’ve not yet built asset location into your investing, consider this tax season to be a great time to take a closer look at how to put asset location to work for you and your wealth.