Levels Where Higher Taxes Triggered: 39.6% + 12.43% + 3.8% + 1.2% = 57%
The income tax minimization process begins with clarifying the desired outcome. Anyone generating excess income taxes has only four choices. Sales proceeds can go to taxes, lifetime income, family members, or charity If nothing is done, one-half or more of the wealth may go to taxes. With proper planning, money spent on unnecessary taxes can be redirected to trusts that generate more after-tax retirement income, larger transfers to family members, or bigger gifts to favorite charities.
Tax lawyers can develop tax-efficient asset sale plans at costs that are often less than 1% of tax savings. Creating tax strategies often requires development of trusts that grow assets tax-efficiently and distribute the assets tax-free. For this reason, the lawyers designing and drafting the plans often work with insurance and investment professionals who can fund the plans with tax-efficient portfolios.
More than 2,000,000 business owners earn more than $500,000 per year. This income is taxed at 55% or higher rates. If the excess income is taxed when earned, invested in taxable accounts, and distributed as ordinary income, the $500,000 might grow to only $662,000 over 30 years. If the you instead invest $500,000 in pre-tax accounts that grow tax-free and distribute tax-free, the $500,000 can grow to more than $5,000,000 -- as shown on the grid above. Even if you don't have $500,000 of extra taxable income to invest this year, these strategies can work well with $100,000 per year for five years.