If you’re a successful long-time investor, or someone who has made good use of your stock options, you may well find yourself in the position of holding one or more chunks of highly concentrated stock. On the one hand, this disproportionate wealth allocation puts you at substantial risk. On the other hand, selling this highly appreciated stock can cause a capital gains nightmare. What to do?
Capital Gains
Are Higher Capital Gains Taxes Coming? How to Lower and Defer Them
Unfortunately, higher capital gains taxes appear to be almost a certainty in the near future. Why? Because President Biden’s $3.5 trillion American Families Plan, if passed by Congress, will raise the long-term capital gains rate from its current 20% to 39.6% if you earn more than $1 million per year.
Using the DST to Reduce Your Investment Risk
Advice on reducing investment risk abounds. Unfortunately, however, little of it applies to you if you have a highly appreciated asset, such as a business or a piece of commercial real estate, that you wish to sell, but are hesitant to do so because of the capital gains tax you will face paying. This is where the Deferred Sales Trust may be just the solution you’re looking for.
How Financial and Investment Advisors Can Use and Benefit From the DST Process
As a financial and investment advisor, you wear many hats as you serve your clients. Some of your important roles include the following:
Hypothetical Scenario: State Capital Gains Tax vs No State Capital Gains Tax
As an investor, you’re all too familiar with the way in which capital gains taxes can eat up a substantial portion of your profit when you sell a highly appreciated asset. To review, today’s federal long-term capital gains rates are as follows: