A. If you are in high brackets -- particularly the 35%, 33% and 28% brackets -- the following 2 actions should be seriously considered.
His two biggest suggestions for advisors? Utilize Roth conversions where applicable and don't shy away from life insurance as a tax-savings plan.
Utilize Roth Conversion
If you're up against estate taxes, Roth IRAs is a very efficient and great option because there will be no tax in growth and distribution phases, plus there is no minimum required distribution. However, for most people, when they think Roth conversions, they just focus on federal taxes, it's wrong.
it's important to pay attention to state income tax laws when converting -- especially when you plan to move for your retirement. You should look at estate tax, federal and state estate tax, as well as the state income tax.
For example, if you are living in Nevada but planning on moving to California, convert in Nevada to avoid the 13.3% California state income tax.
Also, try to separate Roth conversions, which means move assets gradually over a longer period of time (several conversions during a period of time), and create separate Roth accounts, with each invested in a different asset class, it gives you more opportunity to recharacterize if that asset underperforms.
Put Wealth in LIFE INSURANCE
Life insurance is a phenomenal tax shelter, a viable tax savings plan for taxpayers in the 28%, 33% and 35% brackets.
Why? Wealth invested in an IRA, Roth IRA or life insurance policy are all statutory tax shelters, and life insurance policies have the same income tax advantages as the Roth if certain requirements are met. That doesn't help the owners, but it will help your beneficiaries -- because death benefits generally don't get taxed as income to the beneficiary.
If you are in a state that has estate tax and don't need your IRA money in an IRA after RMDs start, pay your tax and drop the money into a life insurance account.