Posts Tagged ‘financial-planning’
Many successful individuals, often those who’ve risen from humble beginnings, find themselves in a high tax bracket while their parents remain in lower income brackets. They feel a strong desire to provide financial assistance to their parents. This article outlines a strategic approach to help family members financially while simultaneously optimizing tax outcomes.
Understanding the Tax Advantage
For high-income earners, long-term capital gains are typically taxed at 20%, with an additional 3.8% net investment income tax (NIIT) on those gains. However, a significant tax advantage exists for individuals with lower taxable incomes. If your parents’ taxable income is below $98,000 annually (in 2025), their long-term capital gains tax rate is 0%. Furthermore, if their Modified Adjusted Gross Income (MAGI) is less than $250,000—a threshold easily met if they qualify for the 0% capital gains rate—they are also exempt from the net investment income tax.
The Strategy: Gifting Appreciated Stocks
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This article was forwarded to me by a client of mine. It was written by Mr. David Karp, who asked seven questions regarding one’s relationship with their advisor. These are excellent questions! I will repost Mr. Karp’s questions and responses, along with my own answers in red and bold.
Besides our family members and close friends, few relationships in life are as important as that of client and wealth advisor … and long lasting. After all, your wealth advisor is trusted with the financial well-being of you and your family, hopefully for generations to come. A good wealth advisor does much more than just manage your investments. He or she will get to know you and your family, your hopes and dreams and the legacy you want to leave. It’s a holistic approach that should be wholly based on the best interests of you and your family.
So how do you evaluate a wealth advisor to ensure you partner with someone who can provide the comprehensive, yet highly individualized set of solutions you need and deserve? Below are seven questions to ask prospective wealth advisors:
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A few weeks ago, I told you about Jon, a long-time reader of my newsletter. His Edward Jones financial advisor was trying to sell him a Variable Universal Life (VUL) policy, and he asked me for my 2nd opinion. Instead of writing my opinion, however, I posted his question to my newsletter readers, and asked you guys to make an assessment.
A few of you came back with the answer of YES since the $2mm death benefit is huge, and the annual premium payment of $17k appears to be quite reasonable. On top of that, the buyer gets the flexibility to skip payments as well. I believe this view of the product is exactly what the insurance company wants but it is misguided.
To answer Jon’s question, I first talked to him to determine his family’s actual need for life insurance. He has two teenage kids and he and his wife already both have 20-year term life insurance policies, each with a $2mm death benefit. They clearly have no need for additional life insurance.
Now let’s look at the product itself. A VUL policy is a combination of two components – life insurance and investment. The product is not entirely under the oversight of the SEC, therefore there is a huge regulatory loophole that the insurance company can use to take advantage of the buyers.
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The Investment Scientist 