22 May

Timeless Tips on Tax-Wise Investing Part II: You and Your Tax-Wise Team

Grant Blindbury

Grant Blindbury

Grant Blindbury has been working in the Investment Advisory industry since 2003 managing assets of affluent individuals and pension plans. Grant earned his bachelor's degree in Business & Economics at the University of California at Los Angeles (UCLA) in 2001. Grant specializes in working with clients approaching or entering retirement and positions them for success by coordinating their most important financial affairs. Grant's goal, as his client’s personal CFO, is to deliver both the financial outcome and experience necessary to accomplish their most important goals. In 2007, Grant earned the professional credential CERTIFIED FINANCIAL PLANNER™ (CFP®). He is president of his local Estate Planning Council and participates in multiple professional learning groups. He is on the Board of Directors for Big Brothers Big Sisters of Ventura County as well as being a “Big” himself. From the outset he was drawn to the client-centric model that fee-based advisory services provided and joined forces with Fields Financial Associates, Inc. He would later partner with the founders of Fields Financial Associates to form FMB Wealth Management. He has been a licensed Investment Advisor since 2003.
Grant Blindbury

In Part I of our series on Tax-Wise Investing, “You and Your
Investments,” we explored how to engage in year-round tax-wise investing by
adopting your own best practices as well as by favoring fund managers who are
likewise keeping a tax-efficient eye on their offerings. There are two other
important areas to tend to as part of your due diligence: your investment
portfolio’s tax-efficient management and your advisers’ tax-efficient teamwork. 

Proper Portfolio
Management: The Art of Asset Location

Beyond tax-wise management of the individual funds in which
you’re invested, some categories of investments are inherently more
tax-efficient than others. For example, stock funds are usually more
tax-efficient than bond funds (with many caveats that we won’t go into here). A
plain vanilla U.S. stock fund tends to be more tax-efficient than funds seeking
to capture the expected premium returns from smaller, less liquid markets. And
so on. This means that another vital way to manage your taxable income is to
practice wise asset location.

The concept is simple enough, but implementation can be
tricky. First, there is only so much room in your tax-sheltered accounts. Challenging
trade-offs must be made to ensure you’re making best use of your available tax-sheltered
“space.” Effective asset location also involves considering other tax-planning
needs, such as the ability to harvest capital losses against capital gains,
donate appreciated shares to charity, implement a step-up in basis, and take
foreign tax credits. While these opportunities have more or less importance
depending on your goals and circumstances, they become unavailable for stocks
held in tax-sheltered accounts.

In short, arriving at – and maintaining – the best asset
location formula for you and your unique circumstances is something of an art
as well as a science. That’s one reason why it’s important to have a
well-coordinated adviser team, to ensure that you’re making best use of all of the
wealth-building opportunities available to you, including but not limited to
asset location.

Organized Alliances:
Do Your Advisers Get Along?

It’s important to manage your investments tax efficiently.
But what about when it comes time to transfer your wealth – bequeathing it to
heirs and making meaningful donations? And what about your tax filings
themselves? Is your accountant aware of what your investment manager is up to,
and are both of them informed of pertinent details related to your estate

In short, are key members of your financial team – your
estate planning attorney, investment adviser, tax professional, insurance
providers and others – acting in isolation or in coordinated concert with one
another? Even if each is seeking to best manage tax-related events within his
or her specialized area of expertise, if there is little or no coordination
among their activities, unnecessary (taxable) gaps or overlaps may occur when
key communications break down.

Putting It Together: The
Tax-Wise Wealth Manager

Tax-efficient investing can add considerable power to your
net wealth – the kind you and your family get to keep after taxes and expenses have taken their toll. But making the most
of the many opportunities can be daunting if you’re going it alone. As we’ve
covered in this series, tax-wise investing includes:

Establishing an effective Investment Policy

Making best use of available tax-sheltered or
tax-free investment accounts

Investing tax efficiently yourself

Selecting fund managers who invest tax
efficiently on your behalf

Appropriately locating your more and less
tax-efficient holdings among your taxable and tax-favored accounts

Ensuring that all of the members of your financial
team are acting in tax-efficient concert with one another across the spectrum
of your financial activities

All this and more is why the final piece in the puzzle is to
engage a wealth manager like FMB Wealth Management to organize the many moving
parts and players involved, keep an eye on it all over time, and help you and
your specialized team members make adjustments when appropriate. The savings
achieved can more than offset your investment in ongoing oversight of your
tax-wise wealth. That’s a good idea, any time of the year.

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