Navigating the complexities of tax planning and asset allocation can significantly impact your wealth preservation and growth strategies. Tru West Financial embraces the Tax Control Triangle, a powerful tool in financial planning, to help clients optimize their tax situations and enhance their wealth.

1. Customized Tax Planning: At Tru West Financial, we understand that one size does not fit all. We use the Tax Control Triangle to develop personalized tax planning strategies that fit your unique financial landscape. By considering your current assets, future goals, and tax implications, we craft a plan that seeks to reduce tax liability and maximize wealth.

2. Strategic Asset Location: Effective asset location is crucial for financial success. By leveraging the Tax Control Triangle, we guide clients on where to place their investments—whether in tax-deferred accounts like 401(k)s, tax-exempt accounts like Roth IRAs, or taxable accounts—to balance growth potential and tax efficiency.

3. Navigating Retirement: For retirees or those nearing retirement, understanding the implications of withdrawals from different account types can be a game-changer. Tru West Financial assists in planning these withdrawals in the context of social security, Medicare premiums, required minimum distributions, etc. To strategically to minimize taxes and ensure a steady income stream.

4. Estate and Legacy Planning: The Tax Control Triangle also plays a vital role in estate planning. By understanding the tax characteristics of your assets, we help you plan your legacy in a way that minimizes the tax burden on your heirs, ensuring that your wealth serves your family for generations.

At Tru West Financial, our mission is to guide you through the financial maze with expertise and personalized care. Utilizing the Tax Control Triangle is just one of the ways we help our clients preserve and grow their wealth, ensuring a secure and prosperous future. Ready to take control of your financial destiny? Let’s explore the benefits of tax-efficient investing together.

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How the Alternative Minimum Tax Works

In simple terms, the AMT is a parallel tax system. You first calculate your taxes under the regular system using IRS Form 1040. Then, using Form 6251, you adjust this calculation by adding back certain deductions and exemptions that aren’t allowed under AMT rules. You must pay the AMT amount if the result exceeds your standard tax liability.

Wealthy individuals are more likely to be affected by AMT due to larger income streams, itemized deductions, and capital gains. For instance, AMT kicks in if you have significant deductions for state and local taxes, exercise incentive stock options (ISOs), or realize considerable capital gains. Therefore, high-income earners must plan around this tax.

AMT Triggers for High-Income Earners

Here are some common factors that can trigger the AMT:

• High household income: If your income exceeds $1,156,300 (for married couples filing jointly) or $578,150 (for single filers), your AMT exemption will start phasing out​.
• Realizing large capital gains: Selling a home or investments for significant long-term gains can push you into AMT territory​.
• Incentive stock options (ISOs): Exercising ISOs can trigger a “paper profit” taxed under AMT even before selling the stock​.

Tax Planning Strategies to Minimize AMT Impact

1. Timing of Income and Deductions: If you’re nearing the AMT threshold, consider strategies like deferring income to future years or accelerating deductions. This can help you stay under the AMT phase-out limits.
2. ISOs and Capital Gains Management: For those holding ISOs, strategically exercising them in years where your income is lower or when the spread between the exercise price and market value is minimal can reduce the AMT hit​. Selling stocks after exercising ISOs can also help cover the tax burden. Furthermore, high-income earners can manage capital gains by selling over several years rather than realizing large gains simultaneously.
3. Invest in AMT-Exempt Bonds: Municipal bonds can be tax-free under the regular system, but some private activity bonds are subject to AMT. Consider switching to bonds that are exempt from AMT​.
4. Contribute to Tax-Deferred Accounts: Maximize contributions to tax-deferred accounts like IRAs and 401(k)s. These can help lower your adjusted gross income, reducing AMT exposure​.
5. Charitable Giving Strategies: Donor-advised funds or structured charitable giving can help reduce taxable income, lowering the risk of triggering the AMT​.

Financial Planning Strategies for AMT Mitigation

While tax planning is critical to navigating the Alternative Minimum Tax, broader financial planning can also help minimize its impact:

• Estate Planning: Utilizing trusts can help shield income from AMT or pass assets in a tax-efficient manner. This is particularly relevant for families aiming to leave a legacy without incurring excessive taxes​.
• Cash Flow Management: Preparing for a potential AMT bill involves maintaining liquidity, especially if you’re exercising stock options. Having cash set aside ensures you’re not forced to sell assets at a disadvantageous time​.
• Multiyear Tax Projections: If you’re on the borderline of AMT, you can work with Tru West Financial to create multiyear tax projections. This approach allows you to plan the timing of large transactions or stock option exercises to minimize taxes over several years​.

Why Talk to Tru West Financial?

At Tru West Financial, we specialize in crafting personalized, long-term financial strategies that address the unique needs of affluent clients. Our advisors are experienced in navigating complex tax situations like the AMT. We can offer guidance tailored to your specific circumstances. By partnering with us, you’ll receive expert tax planning advice and access to a broad range of wealth management strategies—from estate planning to custom investment portfolios designed to minimize tax liabilities.

Remember, managing the AMT is about more than taxes—it’s about securing your financial future in the most efficient way possible. With our fiduciary, fee-only approach, you can trust that we always act in your best interest, ensuring you keep more of what you earn.

The post Understanding the Alternative Minimum Tax: Strategies for Wealthy Individuals appeared first on Tru West Financial.

Donations to their donor-advised fund allow George and Kate to manifest their desire to make an impact and, more importantly, focus on their kids while conveniently choosing to decide later on the charities to whom they want to give.

So, What Exactly Is a Donor-Advised Fund?

A donor-advised fund (DAF) is a charitable investment account created solely to support the causes you care about most. You contribute cash, stocks, or other assets while getting an immediate tax deduction. But don’t rush to spend it all at once; those funds can be invested for tax-free growth. This means you can make your charitable dollars go even further over time.

Think of it as planting a tree that grows money. You decide when and where to harvest the fruit by recommending grants to your favorite charities whenever you’re ready.
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So, How Does It Work?

Setting up a DAF is like opening an exclusive bank account, but instead of stashing away your cash for a rainy day, you’re gearing up to make the world a better place. Here’s how it breaks down:

1. Contribute: You make an irrevocable donation of assets to a sponsoring organization – think community foundations or financial institutions. These assets could be cash, stocks, or even real estate.
2. Tax Perks: As soon as the donation is made, you get a nifty tax receipt. It’s like instant karma but for your taxes.
3. Grow: The sponsoring organization invests the funds, and they grow tax-free. It’s like your money is at a health spa, getting all buffed up.
4. Advise: You get to recommend which charities should get grants from your fund. You maintain advisory privileges over the disbursements and the investment strategy.
5. Donate: Once approved, your chosen charity will receive the funds. The best part? You can support any 501(c)(3) organization.
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The Benefits of Donor-Advised Funds – Why Everyone Wants In

There’s a reason DAFs are the fastest-growing charitable giving vehicle in the United States. They’re versatile, efficient, and packed with benefits.

• Strategic Giving: Spread your donations over time and be strategic about your charitable impact.
• Family Affair: Keep the spirit of giving alive across generations by involving your family in philanthropic decisions.
• Immediate Tax Benefits: Enjoy tax deductions now and decide on donations later.
• Consolidation: Streamline all your charitable contributions into one fund. It’s like tidying up your financial closet.
• Maximize Deductions: By bunching your donations once every few years into a donor-advised fund, you can exceed the standard deduction ($14,600 for single filers, $29,200 for married filing jointly in 2024) and itemize.
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But Wait, There’s a Catch

Donor-advised funds charge an administrative fee for recordkeeping and administrative duties, which can range from 0.25% to more than 2%. Some donor-advised funds restrict the charities you donate to or have rules around minimum account balances. Our firm regularly conducts marketplace due diligence to survey the menu of DAFs so we can ensure every client gets the best match.
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The Bottom Line on Donor-Advised Funds

DAFs offer a unique blend of immediate tax benefits, strategic giving, and long-term growth, making them an attractive option for many. They’re not just about giving money away; they’re about giving it away smartly. Despite some drawbacks, their flexibility and growth opportunities make DAFs a powerful tool in the arsenal of modern charitable giving.

At Tru West Financial, we prioritize personalized financial strategies, focusing on relationships over transactions. Our experienced advisors help you navigate complex wealth management issues, offering custom solutions to maximize charitable impact, influence political processes, or secure your legacy. Contact us today to start your journey towards a secure and impactful financial future.

The post Donor-Advised Funds Explained: Strategic Giving for Tax Savings and Impact appeared first on Tru West Financial.

You’re not alone. Tax time spares no one. Just ask Benjamin Franklin. Whether you’re one of the brave individuals that goes it alone or you enlist the expertise of a professional accountant, it’s essential to keep tax consideration at the forefront of every investment and financial planning decision throughout the year.

Year-Round Tax Planning

At Tru West Financial, we know that effective tax planning isn’t a once-a-year affair—it’s an ongoing process. By staying proactive, we ensure that you’re not just preparing for taxes but strategically planning to minimize them throughout the year. This approach includes reviewing your investments, income, and expenses regularly to identify opportunities for tax savings. 

Charitable Giving Strategies

Giving back isn’t just good for the soul; it’s also smart tax planning. We help you structure your charitable contributions in a way that not only supports the causes you care about but also optimizes your tax benefits. From donor-advised funds to charitable trusts, our strategies aim to enhance your philanthropic impact while maximizing tax efficiency. Let’s make giving back a win-win.

Tax-Optimized Investment Portfolios

Investing wisely means looking beyond the returns and considering the tax implications. Our investment philosophy integrates tax optimization strategies, such as asset location and tax-loss harvesting, to enhance your after-tax returns. By aligning your investment choices with your tax situation, we aim to boost your portfolio’s efficiency—because it’s not just about what you make, it’s about what you keep.

Estate Tax Planning

Your legacy deserves a plan that encompasses more than just asset distribution. Estate tax planning is a crucial element of safeguarding your legacy for future generations. We provide tailored estate planning solutions that address your unique needs, from minimizing potential estate taxes to ensuring a smooth transition of assets. Together, we can create a blueprint that honors your wishes and secures your family’s financial future.

Let’s keep the conversation going. At Tru West Financial, we’re here to make complex financial strategies simple and effective, ensuring that every aspect of your financial life is catered to with personalized care and expertise.

Neither Tru West Financial nor its investment advisor representatives are CPAs or tax attorneys. Our work involves coordination with your qualified tax professional, not providing tax advice or recommendations directly.

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