10 Tax Strategies the Ultra-Wealthy Use
10 Tax Strategies That Only the Ultra-Wealthy Can Use (and Why They’re Often Overlooked)
Neil Goodson, CFA
Tax planning can be complex, especially for high-net-worth individuals. At ProffittGoodson, a leading financial advisory firm based in Knoxville, Tennessee, we specialize in creating personalized tax strategies that not only minimize liabilities but also enhance wealth preservation. While many Knoxville residents are familiar with common tax deductions, lesser-known tactics can deliver substantial savings but are often overlooked. Here, we outline ten advanced strategies tailored for ultra-high-net-worth individuals in Tennessee:
Grantor Retained Annuity Trusts (GRATs)
GRATs allow for strategic wealth transfer with minimal tax impact. By placing assets into a trust and receiving annuity payments, any appreciation shifts to heirs tax-free. Timing is crucial, and Knoxville’s tax laws can influence how these trusts are structured. At ProffittGoodson, we tailor GRATs to align with your long-term financial goals while adhering to Tennessee’s unique regulations.Tax-Loss Harvesting Beyond Stock Markets
Tax-loss harvesting isn’t just for stocks; it can also apply to real estate, art, and other investments, which is particularly relevant to high-net-worth individuals in Knoxville. By selling underperforming assets, you can offset gains elsewhere, reducing overall tax liability. This versatile strategy can be an essential part of your investment portfolio in Tennessee’s dynamic market, and ProffittGoodson can help you implement it effectively.Charitable Lead Trusts (CLTs)
CLTs provide Knoxville residents the opportunity to support causes they care about while lowering taxable income. Assets generate income for charities over a set period, with the remainder passing to heirs at a reduced tax rate. ProffittGoodson’s guidance in charitable giving strategies is tailored to Knoxville’s philanthropic community, helping you maximize both impact and tax savings.Donor-Advised Funds (DAFs)
Donor-Advised Funds allow high-net-worth individuals in Knoxville to bundle charitable contributions in high-income years, providing immediate tax benefits and more control over future donations. ProffittGoodson can help you set up a DAF that aligns with your charitable goals and maximizes the tax advantages available in Tennessee.Captive Insurance Companies
Captive insurance companies allow Knoxville business owners to self-insure while receiving significant tax advantages. Though complex, this approach protects assets and reduces tax liabilities. ProffittGoodson can help Knoxville business owners determine if this strategy aligns with their broader financial plans.Installment Sales to Intentionally Defective Grantor Trusts (IDGTs)
This advanced strategy allows Knoxville’s ultra-high-net-worth residents to “freeze” estate asset values. By selling assets to an IDGT in exchange for a promissory note, any appreciation occurs outside the estate, reducing future estate taxes. Although this strategy is complex, the potential tax savings are significant, and ProffittGoodson’s Knoxville-based team can guide you through every step.Opportunity Zones
Knoxville offers several Opportunity Zones that allow high-net-worth investors to defer capital gains taxes while benefiting underserved communities. ProffittGoodson can help you navigate Knoxville’s Opportunity Zones, aligning your investment strategies with both financial returns and social impact.Family Limited Partnerships (FLPs)
FLPs enable wealth transfer to family members while retaining control of the assets. Knoxville’s unique estate tax considerations make this strategy particularly useful for reducing taxable value while keeping management centralized. ProffittGoodson can design and implement FLPs tailored to Knoxville families’ financial dynamics.Roth IRA Conversions During Low-Income Years
Converting a traditional IRA to a Roth IRA during a low-income year can be a smart move, especially for those in Knoxville expecting higher future tax rates. ProffittGoodson helps Knoxville residents identify the optimal windows for Roth conversions, ensuring tax-free withdrawals in the future.Conservation Easements
Knoxville’s scenic landscape makes conservation easements an attractive option for land-rich residents. By donating land for conservation, property owners can claim significant tax deductions while preserving natural resources. ProffittGoodson can help Knoxville’s landowners explore whether a conservation easement aligns with their estate planning strategy.
At ProffittGoodson, we are committed to providing personalized tax strategies for high-net-worth individuals and business owners in Knoxville, Tennessee. Whether you’re looking to explore advanced strategies like GRATs or take advantage of Knoxville’s Opportunity Zones, our Knoxville-based team of top financial advisors can tailor solutions to fit your unique needs and protect your wealth.
Reach out to us today to learn more about how these often-overlooked tax strategies can work for you in Knoxville.
Contact us at 865-584-1850 or info@proffittgoodson.com
DISCLOSURES: The information provided in this letter is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy, or investment product, and should not be construed as investment, legal, or tax advice. Proffitt & Goodson, Inc. makes no warranties with regard to the information or results obtained by third parties and its use and disclaims any liability arising out of, or reliance on the information. The information is subject to change and, although based on information that Proffitt & Goodson, Inc. considers reliable, it is not guaranteed as to accuracy or completeness. Source information is obtained from independent financial data suppliers (Interactive Data Corporation, Morningstar, etc.). The Market Categories illustrated in this Financial Market Summary are indexes of specific equity, fixed income, or other categories. An index reflects the underlying securities in a particular selection of securities picked due to a particular type of investment. These indexes account for the reinvestment of dividends and other income but do not account for any transaction, custody, tax, or management fees encountered in real life. To that extent, these index numbers are artificial and cannot be duplicated in real life due to the necessity of paying those transaction, custody, tax, and management fees. Industry and specific sector returns (technology, utilities, etc.) do not account for the reinvestment of dividends or other income. Future events will cause these historical rates of return to be different in the future with the potential for loss as well as profit. Specific indexes may change their definition of particular security types included over time. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of Proffitt & Goodson, Inc. Past performance does not guarantee future results.
