4 Tax-Efficient Strategies for Affluent Families
By Daniel Baumgartner & Petra Peters
No one looks forward to tax season. However, given the complex finances of most affluent families, coming up with a cohesive tax strategy can be especially challenging for those with high net worth. In this piece, we take you through some popular, tax-efficient strategies for affluent families.
When it comes to building your family’s tax strategy, it’s important to work with your financial team to create a plan that’s tailored to your every need. But these tax-efficient strategies for affluent families are a good place to start.
1. Optimize Your Investments
When you work with us, we develop a personalized investment strategy that suits your family and your goals. To make your investments as efficient as possible, we can help you use these tax-efficient strategies for affluent families:
Asset Location
This strategy involves placing tax-inefficient investments (like bonds) into tax-deferred accounts and tax-efficient investments (like stocks) in taxable accounts. A thoughtful asset location strategy can potentially save you thousands on your taxes.
Tax-Loss Harvesting
Capital gains taxes can really add up. With tax-loss harvesting, you offset capital gains with losses to reduce the total amount you pay.
Portfolio Rebalancing
It’s important to periodically reevaluate your portfolio and make adjustments as needed. We can fine-tune your investments to help align them with your goals.
2. Put a Smart Charitable Giving Strategy in Place
Charitable giving allows you to see your wealth making a difference in the world. But did you know it comes with tax benefits for you too? If charitable giving is part of your overall financial plan, take note of these tax-efficient strategies for affluent families:
Using Donor-Advised Funds (DAFs)
You get an immediate tax deduction when you set up and fund a giving account. You can then make grants to qualifying charitable organizations over time.
Donating Appreciated Stocks
When you donate appreciated stocks or other assets to charity, you don’t owe capital gains tax (and neither does the charity). You can deduct the full appreciated value from your taxes too.
3. Make Use of Tax-Advantaged Investment Accounts
Some of the most tax-efficient strategies for affluent families could be right under your nose. Tax-advantaged accounts like these can save you thousands of dollars over time:
Retirement Accounts
If you have an IRA or an employer-sponsored retirement account (or both), maxing out your contributions can lower taxable income while helping you build a better future.
529 Plans
Using 529 plans to save for college and other educational costs is one of the key tax-efficient strategies for affluent families with children. Many people mistakenly believe that 529 plans only cover college expenses, but they can also be used to cover tuition and expenses for elementary, middle, and high school students.
Health Savings Accounts (HSAs)
If you have a health insurance plan with an HSA, you should take advantage of it. HSAs have a so-called triple tax advantage: your contributions are tax-deductible, growth in the account is tax-free, and withdrawals for qualifying health expenses are also tax-free.
4. Coordinate Your Tax Strategy With a Dedicated Advisory Team
Even the most effective tax-efficient strategies for affluent families can lose impact if they’re applied in isolation. A strong tax strategy works best when investments, charitable giving, retirement planning, and long-term goals are coordinated within one cohesive plan.
Working with a dedicated advisory team helps keep your strategy proactive and aligned as tax laws, income, and family circumstances change. This integrated approach can uncover opportunities to reduce taxes throughout the year, minimize inefficiencies, and avoid last-minute decisions during tax season.
When you choose the right tax-efficient strategies for affluent families, you keep more of your money in your pocket—and spend less time stressing about it. At Terra Nova Asset Management, we help New York and New Jersey families integrate tax-efficient strategies into a comprehensive financial plan built to evolve with their lives.
Does it seem like we may be a good fit? Reach out to us directly at 212-355-1234 or ppeters@terranovausa.com for the New York office (Petra) or 855-248-6630 or baumgartner@terranovausa.com for the New Jersey office (Daniel). You may also contact us here to schedule a meeting and we’ll get in touch with you soon!
Frequently Asked Questions
What are the most effective tax-efficient strategies for affluent families?
Some of the most effective tax-efficient strategies for affluent families include optimizing investments through asset location and tax-loss harvesting, using tax-advantaged accounts like retirement plans, HSAs, and 529 plans, and incorporating charitable giving strategies such as donor-advised funds and donating appreciated assets. When coordinated properly, these strategies can help reduce taxes while supporting long-term wealth goals.
How can a financial advisor help affluent families reduce taxes?
A financial advisor helps affluent families reduce taxes by coordinating investments, charitable giving, and retirement planning into a cohesive, proactive strategy. At Terra Nova Asset Management, advisors work closely with clients to identify tax-saving opportunities throughout the year, adjust strategies as laws and circumstances change, and help keep financial decisions aligned with long-term objectives.
Why is coordinated tax planning important for high-net-worth families?
Coordinated tax planning is important for high-net-worth families because financial decisions made in isolation can lead to missed opportunities and unnecessary taxes. An integrated approach allows strategies to work together more efficiently, helping families keep more of their wealth and reduce financial stress. Terra Nova Asset Management helps New York and New Jersey families implement tax-efficient strategies within a comprehensive financial plan designed to evolve over time.
About Daniel
Daniel Baumgartner is a founding partner of Terra Nova Asset Management LLC, a partner-owned investment advisory firm that manages individual portfolios for clients. Daniel has extensive experience in marketing, development of special U.S.-investment products, as well as customer acquisition and relationship management. His ultimate goal is to make a difference in his clients’ financial lives through honest investment advice. He strives to provide high-touch, personalized service and enjoys getting to know a client’s personality as it relates to their financial circumstances before crafting the right solutions. As money is a very personal subject, Daniel takes his responsibility as an advisor very seriously, forming long-term relationships with clients based on trust.
Daniel received his degree in finance and international business from New York University. Outside of the office, he is a hobby landscape, street photographer, and has a great interest in U.S. and European history (16th-19th centuries), believing it helps him answer the question “Why is something the way it is?”
About Petra
Petra Peters is a founding partner and the Chief Executive Officer of Terra Nova Asset Management LLC, a partner-owned investment advisory firm that manages individual portfolios for clients. Petra has decades of experience in the banking industry, asset management, overseeing the administration of individual accounts, and designing and advising specialized funds tailored to the requirements of international private and institutional clients. With extensive knowledge of both Europe and the U.S., she’s able to provide advice and services beyond the typical investment advisor. Petra desires for her clients to live a financially care-free life so they can pursue their passions, and she values their trust and gratitude. Creating invaluable friendships formed over years of partnership, some clients even consider her part of their family.
Petra’s interests outside of work include classical music, history, travel, charities, motorcycling, and golf. She is also on the board of a German charity.