Tax Analysis

Executive Summary

A married couple needed to create cash from their taxable account as they were dramatically over exposed to equities based on near term cash needs to recent life changes. A tax analysis needed to be done to determine the capital gains impact.

  • Had been a client of the firm for several years.
  • Husband was retired,the spouse was working.
  • Husband was 66 and planning on collecting Social Security.
  • We had been converting 25k/year to a Roth IRA for the last 5 years.
  • Clients are charitably inclined.

INITIAL PLAN

KEY DISCUSSION POINTS:
  • Client was worried that he would not be able to do his annual Roth conversion.
  • Client was resistant in sending us copies of his tax documents, but did so any way.
  • Spouse was curious what the plan would look like if she retired early, even though her current job satisfaction was high.
  • Spouse was worried that health care costs before age 65 would be detrimental to their plan.

RESULT

The result after a tax analysis by our Advance Planning Team was that we should decrease the Roth conversion amount by 5k to a total of 20k for this year, and that we could harvest 40k in LTCG’s and still be under the 15% tax bracket and therefore not have to pay any capital gains tax:
  • The tax analysis provided clarity and certainty around what needed to be done to achieve the client’s goals in the optimal manner.
  • Through the tax analysis our Advance Planning Team discovered an error by the client’s accountant which resulted in the client getting a larger refund on their prior tax year.
  • Our Advanced Planning Team was also able to come up with a method that would allow the spouse to retire before 65, and get most if not all of her Health Insurance covered by MNsure.