So, here we are in December. And you might be in a panic over your year-end tax planning – especially if you run the affairs of a large family office.
Well, that’s understandable, says Thomas Handler, who chairs the Advanced Planning & Family Office Practice Group at Handler Thayer, LLP, in Chicago.
“The nature of December – and I don’t see this ever changing – is that everyone who should have done things or implemented strategies earlier in the year waits until the last minute,” he said on the show recently.
“Or, alternatively, they realize the kind of condition they’re going to be in – so (they think) now’s the time to act.”
So, they act – often buying poorly conceived solutions in the process, Handler said.
“There’s a saying that I learned early in my career: ‘After Thanksgiving, all the turkeys hit the street.’ The strategies that people are running around with at the last minute are probably those that you shouldn’t be doing because they may not be well thought out and they’re done in desperation,” he said.
“If someone’s holding up a deal like a gymnastics sign saying, ‘7-to-1 writeoff,’ that’s probably not where you want to be.”
The four areas that people tend to focus on at year-end are:
– Income tax planning
– Charitable gifts
– Family gifts
– Defensive measures and compliance designed to protect long-term wealth
To tackle this effectively, Handler said, you really need a multidisciplinary team on your side – experts who can collaborate with each other and plan ahead to your benefit.
There are many problems with last-minute strategies, he said, but one key issue is that the majority of the tax benefits are tied to the number of months that they’ve been implemented. So one month just won’t cut it.
Yes, there are some effective things you can do at year-end, and Handler covered several in the interview. But, for the most part, it pays to stay on top of things throughout the year.
In fact, the best year-end tax planning, I think, happens at the end of the prior year.
Handler generally handles the planning for family offices with a net worth of $10 million or more, but he also serves those with high incomes and a growing business.
“Tax planning is better done in a strategic manner and not looking at a particular panacea. You know – one strategy that’s going to solve all of your problems. It’s a combination of using a whole bunch of things – IRAs, pensions, 529 plans, things that defer tax, things that aren’t subject to tax, municipal bonds, things that aren’t taxable in your state,” he said.
“It’s a lot of small things put together in a thoughtful way that have a large impact over your lifetime without taking any unreasonable tax risks that you don’t need to take.”
Like I said, Handler mentioned a few items that can be implemented at year-end to save on taxes, so click here to listen to the full interview.
You can reach Thomas Handler of Handler Thayer, LLP, at 312-641-2100 or online at www.handlerthayer.com.
