Most of the assets are funds in some kind of qualified plan (such as an IRA, 401(k), profit-sharing or the like) or other funds that have been accumulated over the reader’s lifetime. Sometimes the funds are in a trust, partnership or other entity. But the struggle is always the same: how to invest the funds.
Historically low interest rates, the lousy economy, the uncertainty of Wall Street and other negative domestic and international factors have created an investment problem that seems to have no known solution. What can we do?
Enter the tax law, and tax-advantaged investments. For tax purposes there are two types of funds you can invest: qualified and non-qualified funds. Qualified funds such as an IRA are subject to double taxes, both income and estate. Non-qualified funds are only subject to the estate tax.
There are an endless variety of tax-advantaged strategies to accomplish your investment goals. The examples that follow are the two strategies we use most frequently in our tax practice.