It’ll be critical to consider the tax implications of your investment and savings vehicles when you create your estate plan. Investment grade insurance contracts and indexed universal life insurance are ways to invest your money in a way that will grow tax-free, provide a death benefit, and be accessible when you need it.
Tax upstreaming is a method for reducing or eliminating corporate state income taxes by relocating profits to states with lower or no income taxes.
Self-directed retirement accounts have the same benefits as standard IRAs, except they allow you to invest your money in whichever way you desire, rather than being restricted to stocks, bonds, and mutual funds.
To get the most out of your tax savings, speak with someone who is up to date on the current tax legislation, including the recently adopted Trump Tax Plan.
Investment Grade Insurance Contracts
An investment-grade insurance contract is one that allows you to invest your money without paying paying taxes on its growth while also allowing you to withdraw it when you need to without paying taxes on the withdrawal. This means you can save your money, while receiving interest on it, and never needing to share any of it with the government as it grows.
Tax upstreaming is a money-saving practice in which a C-corporation based in one state “upstreams” its earnings to a subsidiary based in another state. The corporation can avoid paying state income tax in its home state if everything is done correctly. When upstreaming to a company in a state with no income tax, such as Nevada, the strategy is most effective.
Indexed Universal Life Insurance
IULs are a form of whole life insurance policy in which the cash value is determined by index performance and grows over time. Each year, you and your financial advisor invest the money in your policy in a growth index, which often reflects market indexes such as the S&P 500, Dow Jones Industrial Average, Nasdaq 100, and so on (though the policy money is not invested directly into the stock market).
Self-Directed Retirement Accounts
Traditional IRA contributions are often invested in equities, bonds, or mutual funds. The difference between a traditional IRA and a self-directed IRA is that you have more investment options with a self-directed IRA. You can invest your money in real estate, private mortgages, precious metals, intellectual property, private company stock, private market securities, and other alternative investments, just to name a few options.
Trump Tax Plan
On December 20, 2017, the “Tax Cuts and Jobs Act of 2017,” also called the Trump Tax Plan, was passed by the House of Representatives and was the biggest piece of tax legislation since Ronald Reagan’s Tax Reform Act of 1986. This tax bill made a decrease in the tax rates for the majority of brackets for individuals but creates bigger savings for corporations by eliminating the corporate alternative minimum tax. Small businesses that implement a pass-through tax strategy can find significant savings as well. Businesses with incomes that come from outside the United States can benefit from these things as well.