Do you know what to focus on if you have significant assets that would fall inside your estate? If not, you could be putting your loved ones in line to pay unnecessary tax consequences. The federal government has long made incentives to set aside money in the form of savings by giving some combination of three different tax preference types; deferral, deductibility and tax-free distributions. For those high earning households, however, it’s all about determining the right tax preferenced vehicles and the hierarchy they should be used in.
As contribution limits are met in each of these tax preferenced vehicles, the hierarchical model can help you by moving additional savings over to the next tier. There are two primary types of retirement accounts considered tax preferenced. Some provide tax deductions for contributions but ultimately will tax the distributions and Roth style accounts are tax free when distributed but are not deductible when contributions are made. Certain types of tax preferred savings accounts maybe even better.
For example, an HSA is a triple tax-free savings account because it allows for tax deductible contributions upfront, tax deferred growth and tax-free distributions for qualified expenses. There may be different goals that you bring to the table when talking with your advanced wealth planning strategies or your asset protection planning attorney. It could be building family wealth and looking to establish strategy to pass it through multiple generations, paying for college for your children, maximizing the economic value and possible reach of the dollars being saved for longevity purposes or saving for retirement.
Deciding the right vehicles for you requires sitting down with someone who is knowledgeable and focused on giving you an overall picture of how to best protect yourself and your loved ones now and in the future. Schedule a consultation with a Pasadena estate planning lawyer who will give you the personalized attention and focus you deserve while making these important decisions.
