A Matter of Perspective

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Important life decision on the horizon? Call your tax advisor

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perspectives-callout-2As your career and net worth grow, so do the number of important decisions you must make. Most of us have trusted advisors, mentors, family members or friends who provide guidance at critical points in our personal and professional lives. Even with that support network, it is normal to wonder, “Do I have access to all the different perspectives I need to make the best decisions?”

To help answer that question, we decided to write this three-part series of columns. In the first column, we pointed out that while having a skilled financial advisor is important for high-net-worth individuals, input from other professional resources could help preserve your wealth.

Along with your financial advisor, trusted tax and legal advisors can be an essential part of your team. This is especially evident when considering some of the largest decisions of your life, including whether it is time to buy or sell a business. Tax and legal advisors can help navigate the frequently changing rules and regulations around decisions like that which can have a significant impact on your personal wealth.

If your personal wealth is intertwined with your privately owned business, and especially if you are considering selling your business, you will likely seek guidance from those closest to you — business partners, spouse, friends and colleagues. At Nachman Norwood & Parrott, we often invite tax and legal advisors to be involved with our clients’ decisions, and often much earlier in the process than you might think.

In some of these instances, we have enjoyed the privilege of working with Kris Gretzschel, CPA, CFP, who is the first vice president and manager of the tax and financial planning team and life event services at Wells Fargo Advisors. She advises that clients should go to an advisor two years before, rather than when, they are ready to sell. In her experience, Kris has found that “clients are likely to overstate the value of their business, and an advisor can help them determine if they will have to make other changes that could impact that value and sale beforehand.”

Another major component of tax planning that should be considered is estate planning and estate taxes. Currently the estate tax exemption limit is $5,450,000 per person, or nearly $11 million per couple. While this threshold does decrease the need for complicated estate tax planning for many, there is more to the issue than meets the eye. There is the potential for the individual and family to take advantage of a step-up in the income tax basis of an individual’s assets at death. The law provides that the income tax basis of an asset is determined to be the value of the asset at the time of death, not the price at the time at which the original party purchased the asset. The family of the deceased would get a new basis at the current value.

This may cause an individual to rethink their gift strategy and the time at which they transfer stock. David Merline, an experienced tax attorney here in Greenville, advises further: “If you are no longer subject to estate tax, then there is less impetus for you to make gifts to your family unless they happen to need the cash. In terms of liquid assets, such as equities, we often advise people to hold on to their stock until their death instead of gifting it to their child or grandchild.”

Tax attorneys and tax advisors have a wealth of knowledge that can be valuable in crafting a sound financial plan. Their insights are particularly relevant for significant life decisions such as buying or selling a business or estate planning.

In the next and final column in this series, Wes Boyce will review how insurance is often the forgotten factor in investment planning, and how having the right perspective can help you evaluate your evolving insurance needs as your wealth grows.


PART I: Managing wealth takes more than just a financial advisor

For more on “Perspectives,” visit nnpwealth.com.

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