Rexford Cattanach discusses the value of tax planning for high-net-worth clients

Listen to the interview on the Business Innovators Radio Network: Interview with Rexford Cattanach, President of Keats Group Discussing Tax Planning for High Net Worth Clients – Business Innovators Radio Network

Rexford Cattanach, president of Keats Group, discusses the importance of approaching wealth management with an asset protection mindset ─ with taxes being the largest creditor and risk for high-net-worth clients. The conversation delves into the benefits of specific tax and estate planning strategies during both the accumulation and retirement distribution life stages.

Navigating the IRA Rule Changes: A Proactive Approach:

Investing for retirement seems to get most of the attention, but protecting assets from the ravages of taxes requires a strategic approach. The SECURE Act retirement legislation has made IRAs and other untaxed retirement accounts less secure and valuable to beneficiaries. Rexford discusses these tax traps and steps high-net-worth clients can take to mitigate the risks.

One proactive strategy mentioned is the Roth conversion, which involves transferring funds from a traditional IRA to a Roth IRA, taxable at the current marginal tax rate. However, the benefits of tax-free growth in the Roth account can outweigh the immediate tax bill by eliminating the compounded growth that could be taxed at higher tax rates. Good planning models the timing and amount of funds to convert to optimize tax efficiency.

Rexford shared: “You really have an IRA statement in your name for $1 million, but the government owns 40%, 50%, maybe more of that million-dollar IRA.” In situations where clients are confident their tax rate will be materially lower, that IRA might be okay. However, math often shows that required distributions from these compounding pre-tax accounts make for a higher tax bill. It’s important to keep in mind that a tax deduction for a 401k or Traditional IRA contribution is more like a deferral on the taxes you will pay.

Understanding the Importance of Proactive Tax Planning

Recent retirement legislation has changed the rules of estate planning, too. As Rexford Cattanach highlights in the podcast, successful clients like flexibility and control and many high-net-worth individuals have established a trust for this purpose. These should be re-visited. Successful families can improve their tax position and protect wealth using Roth conversions, smart leverage with permanent insurance, capital gains management, and step-up basis tax planning strategies. Family gifting and charitable giving strategies provide substantial tax benefits to families inclined to share their wealth. The combination of expert advice and generosity has provided notable figures like Warren Buffett and the late Charlie Munger with the ability to maintain low effective tax rates despite their immense wealth.

Often overlooked is the planning priority of placing distinct types of investments in the optimal type of account or asset location. For instance, dividend-paying stocks may not be ideal in tax-deferred accounts, as the compounding of dividends will lead to a larger tax bill later. Conversely, low or zero-dividend stocks in taxable accounts can provide tax advantages, such as capital gains treatment or a step-up in basis upon inheritance, resulting in low or no tax to beneficiaries.

About Rexford Cattanach

Rexford is president of Keats Group LLC, a comprehensive financial advisory firm. He works with successful families and family businesses to implement effective income planning, tax planning, and asset protection solutions that are administratively practical. He manages our service relationships with specialists for complex tax and estate planning, business transitions, and compensation planning.

He writes and speaks on various succession and compensation planning topics for professionals and business owners. He is the lead author of InBusiness™, which features topics of planning interest to Private Clients.

Mr. Cattanach has served on community boards and other leadership roles in the Twin Cities, including the Board of Directors of Lakeview Health, a sole corporate member of HealthPartners health system, where he was chair of the physician and executive compensation committee, a member of the finance committee and the ad hoc committee overseeing the Lakeview Health integration with HealthPartners.

Rexford is a fiduciary, independent financial advisor who has completed over one hundred business valuations and transitions. For 19 years, he has volunteered as an academic tutor and mentor to at-risk K-12 children at Good Neighbor Center in Saint Paul, Minnesota. To recharge, he enjoys the quiet scenery of trail hiking, road biking, and Nordic skiing.

Learn More: https://www.keatsgroup.com/

Keats Group LLC is a comprehensive financial services company that provides investment, tax and estate planning, asset protection, and pre-and post-sale guidance to private clients and business families. Keats Group and its agents and employees do not provide legal or tax advice. Investment services are offered as a fiduciary Independent Advisor Representative of Advisor Share Wealth Management, a Registered Investment Advisor (RIA).

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