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Ken Julian Discusses Tax Strategies You Can Use to Minimize Your Tax Bill

We sat down with Halsey Associates EVP of Client Portfolios Ken Julian to ask about tax strategies investors should consider. Ken regularly meets with individual investors who may have questions about potential investments or how to create tax savings for themselves. He shared with us some of those tax strategies for investors. Here’s what he had to say.

Q: In your opinion, what is the most common tax mistake or misunderstanding investors make?

A: The biggest thing is that people don’t think about taxes at all. Every time I speak with someone about investment, we always talk about taxes. So it’s crucial to understand how you can manage them in addition to thinking about how to manage the asset itself.

Q: What are some of the more common tax strategies that investors should consider?

A: So one thing we always talk about is the qualified dividend rate. That’s because as of this year, it’s 15%. For someone who has taxable income, if they can invest in something that will pay out a good dividend and hopefully grow their principal as well, that would be a great way to do it.

For example, many utility companies have nice dividend yields because they are regulated and can’t really raise their prices as much. So that’s one thing we look for. The other thing is any increase in tax rates on capital gains and dividends in the future. So if you have investments that will have tremendous long-term growth, you should sell them in the current tax environment because it will be much more beneficial.

The other thing we are looking at is municipal bonds. They’re still a pretty good investment vehicle for people with interest income, especially those with high state tax rates. Another great strategy I like to use is the gift tax exemption amount, which some people forget about. It’s $14,000 in 2021 (it will be going up to $15,800 in 2022).

Q: What are some of the common mistakes investors make when it comes to estate planning?

A: A couple of things. One, not having an up-to-date will. And two, people don’t get their beneficiaries updated and forget that what they have can change over time.

Q: What sort of estate planning strategies would you recommend for people to consider?

A: Well, the first thing is having a will. And if you have children, the will should name an executor and beneficiaries. You also want to make sure that your beneficiary designations match up with what’s in the will.

The other part of it is to do a health care directive. That way, if you cannot make decisions for yourself, you have someone who can.

Q: What sort of estate planning strategies should entrepreneurs consider?

A: For business owners, they always want to have a buy-sell type agreement. They also need to think about life insurance because, many times, that will provide the necessary cash flow to sustain and grow a business.

The next thing is a revocable living trust, which allows you to control your estate and still be eligible for the estate tax exemption amount. That way, if you are like me and don’t want any of your assets going to the probate court, this will avoid that. A revocable living trust also allows you, in many cases, to avoid probate, which can be an expensive process.

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