Broker Check

Too Much of a Good Thing?

The Background:

Gene and Debbie Rose were a wealthy couple that had always managed their own investments. They were interviewing financial planners to determine who was best suited to handle the final years of their retirement and ensure that things continued on the path they had built. 

After several meetings, the Brayshaw Financial Group discussed some breakdowns in their current allocations, that other advisors did not address. The main issue was the municipal bonds they held that were not Alternative Minimum Tax (AMT) exempt. We began by educating Gene and Debbie on the fact that regardless of the tax benefits of owning Municipal Bonds, they were paying taxes because their income was being reinvested as they were above AMT income thresholds. 

Upon further evaluation of their portfolio, and additional recommendations, the Rose’s decided to use Brayshaw Financial Group to manage their investments. 

During the estate planning process, we discussed the large gains they had in their annuities.  With gains in annuities being taxed as ordinary income, the Rose’s continued to defer assets to avoid the taxes. We were concerned that even though they were taxable, their children, who were all making strong incomes, would one day inherit these assets and pay much higher taxes than Gene and Debbie would. However, liquidating the annuities now presented a large tax burden as well and required some planning. The Brayshaw Financial Group engaged both the Rose’s and their children in the planning work and sought to fully address the issues around minimizing multi-generational tax concerns.  

The Brayshaw Financial Complete Wealth Management Approach:

  1. We began by recommending a Charitable Lead Trust for the exact amount needed to offset taxable liability on a portion of the Rose’s investments.
  2. This created an immediate tax deduction against ordinary income created from the liquidation of the annuities.
  3. Income was given to the charities of the Rose's choice.
  4. After five short years, the charitable trust returned nearly the entire principal of the trust investment back to Gene and Debbie.

The Rose’s and their children were very pleased with the forethought provided by Brayshaw Financial in addressing generational tax issues that are not usually apparent until assets transfer from parents to children. The entire family now works with us.