If you are like most of our clients, you probably have heard of the importance of taxes when planning for retirement or building wealth. The multiple types of taxes are some of the hidden landmines you can encounter as you continue to save and build up your portfolio. In fact, total taxes can take upwards of 45%-50% of your nest egg if your money is taxable or tax deferred. That tax bite is likely to go up since the national debt is over 27 trillion dollars, and recently elected politicians have said they are going to increase taxes. Regardless of political perspective, increased taxes are the likely result of increased national debt. Therefore, creating a long-term tax plan should be a critical component of everyone’s financial plan. But where do you start? Do you do it yourself? Do you involve professionals? What type of professionals do you involve? Our belief is that there is an important place for tax-planning professionals (CPAs, tax attorneys, and financial advisors) in your tax planning process that can provide immense value. These professionals form the “three-legged stool” of tax planning, allowing collaboration and teamwork to ensure you are properly advised and prepared to avoid the dangerous hidden landmines of taxation.
Let us first start by looking at the three major types of taxes, for in order to avoid tax landmines you must first know where they are located. Below are the definitions for each main type of tax:
- Income Tax: a tax on the net income of an individual or a business
- Capital Gains Tax: a tax on the growth in value of assets incurred when individuals or corporations sell those assets
- Estate Tax: a tax on transferred property at death.
All taxes are a portion of what some people refer to as “social capital”. In short, social capital is what is required to be given back for the privilege of living in America. There are two different ways of managing that social capital. You can either be reactive and let the government control your social capital through taxes, or you can choose to be proactive and control your social capital by taking advantage of tax-reduction strategies available under the law. Being proactive empowers you to meaningfully transform your family’s financial future, but it can be complicated, and it usually is wise to seek assistance from tax-planning professionals.
So how do you be proactive and take control of your social capital? You may consider working with the “three-legged stool” of tax-planning (CPAs, tax attorneys, and financial advisors). Each of the three legs of the stool are important, but you may not use all at the same time. If you were to ask each leg the same question, “how do I save on taxes?”, you will probably get 3 different answers. So who is correct? The reality is that all three of them may have elements of truth in their answers, so collaboration between the three will most likely be in your best interest. That is where Aspen Creek comes in. We can serve as the facilitator of that collaboration.
We are passionate about educating our clients on healthy tax and financial strategies, and our advanced tax planners on staff are equipped to develop and help implement your tax plan with you and your other tax-planning professionals.
We want to help ensure that you control your social capital and improve your overall financial health. To request an appointment call us at 719-722-2133 or fill out this appointment request form. It would be our pleasure to assist you on your tax-planning journey.