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Tax Planning

For High Net Worth Families

The Situation

An increasingly complex and uncertain tax environment makes it difficult for affluent families to plan for the future. After all, taxation represents a significant variable in how much wealth a family retains versus renders to local, state and federal governments.

Our clients understand the value of hard work, discipline and taking risks. As entrepreneurs and executives, they have had to make tough decisions through difficult economic times. But for many of our clients, taxes symbolize an X factor over which they feel they have little control.

At Whitnell, we’ve noticed that our clients are deeply distressed by taxation. They don’t mind paying their fair share. However, they often feel as if they have a target on their back when it comes to taxation. It’s not simply that they feel over-taxed. It’s also the uncertainty of how taxation will change down the road. There is a fear that as bad as things are today, they could get worse.

Governments, with changes in tax rates, can take as much as half or even more of our client’s income and a third of their gains. There is a feeling, among our clients, that government entities are more than ready to share in the upside of wealth creation but not the downside of potential losses.

When new clients come to us, it is often with a sense of resignation about taxes. They sometimes feel as if there is no hope. They have frequently handled taxes on their own, or with a tax professional, and yet have not realized a desirable outcome. However, as we examine their past tax returns, we can discover that they have missed opportunities that could have benefitted them.

What we begin to discover, quite often, is that they “handled” taxes but did not truly have a plan. In certain instances, these families have many options for achieving a more desirable, and fair, taxation situation. But to accomplish this, they need a real plan.

It is important to realize that tax planning is much different from tax preparation. The time for tax planning is well before the end of the year. Once December 31 arrives, it is too late. The strategy for taxes needs to be proactively executed before the year ends. This is why a tax plan is so critical to wealth preservation.