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Asset Preservation Advisors


State: GA

APA’s philosophy is to work closely with our clients to develop an in-depth understanding of their unique needs and objectives. We then customize a municipal bond portfolio that best meets their specific goals and needs. APA manages high quality municipal bond portfolios in four strategies: Short-Term, Intermediate-Term, High Income, and Taxable.

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High Net Worth and Changing Tax Strategies

High net worth investors may want to rethink tax strategies ahead of looming changes in U.S. tax laws.

| BY Adriana Reyneri

Uncertainty surrounding U.S. tax laws is likely to continue past the general election in November, but financial planning experts say it’s not too soon for high net worth investors to rethink tax strategies.

The potential for tax increases worries a large majority – 70 percent – of high net worth investors surveyed by Millionaire Corner in the first quarter of 2012. The potential changes are prompting 40 percent of the high net worth – who have investable assets of $5 million to $25 million – to change some of their tax strategies.

Among the potential changes is the expiration of tax cuts dating back to 2001. If Congress allows the Bush era tax cuts to expire, the top tax bracket will rise to a maximum tax rate of 39.6 percent from the current 35 percent. The tax on long-term investment gains will rise from the current 15 percent to a maximum 20 percent capital gains tax. Dividends, currently taxed at a rate of 15 percent, will be taxed as ordinary income up to the maximum rate of 39.6 percent. An additional Medicare tax of 3.8 percent on high income households – a married couple with $250,000 in taxable income - could push the top tax rate on dividends to 43.4 percent. In addition, payroll tax cuts passed in 2010 are set to expire, as is a temporary “patch” on the Alternative Minimum Tax.

The changes represent a huge jump in taxes for high net worth investors. Dividend income, alone could shrink from the current 85 cents to 56 cents on every dividend dollar – a big drop for investors who rely on equities for a significant portion of their income, according to investment managers at the Wells Fargo Wealth Management Insights Center.

“In our view investors facing the greatest level of risk are those investors with a higher-than-average reliance on dividends from their equity holdings to meet their income needs,” reported the financial service firm in a Quick Market Update. At the same time, some exposure to the long-term growth potential of stocks is “both necessary and desirable” to help investors stay ahead of inflation, according to Wells Fargo.

Portfolio adjustments made in 2013 could be subject to a high capital gains tax, said the firm, which recommends that investors take a proactive approach. “Developing a comprehensive investment strategy that addresses tax efficiency, asset allocation, risk management, and income needs is critical to pursuing future financial goals,” said Wells Fargo in its market update.

High net worth investors also face possible changes to alternative minimum tax rates and a new Medicare surcharge, said Wells Fargo.