Tax Planning in a Shifting Landscape: What High-Net-Worth Investors Should Know Now

As markets fluctuate and tax laws evolve, high-net-worth investors are navigating a financial environment that demands more foresight than ever. For those with significant wealth, these shifts don’t just affect annual tax filings—they carry long-term implications for investment outcomes, retirement readiness, and legacy planning.

Even with Congress moving to preserve current income tax rates and maintain historically high estate and gift tax exemptions, any sense of stability should be met with strategic urgency. Favorable laws may hold for now, but that doesn’t eliminate the need for smart, proactive tax planning.

Because the real opportunity isn’t just about avoiding change. It’s about using this moment to optimize what you keep, what you pass on, and how well your financial life supports your vision for the future.

Why High Earners Still Face More Complexity

Though recent legislation offers some clarity, navigating the tax code is still far from straightforward for those with significant wealth. In fact, a consistent legislative backdrop can sometimes obscure just how many layers of complexity still exist for those with higher income, diverse portfolios, and multi-generational planning goals. For instance, the 3.8% Net Investment Income Tax (NIIT), the Alternative Minimum Tax (AMT), and the phaseout of deductions at higher income levels can lead to a significantly higher effective tax rate.

Adding to the challenge:

• High earners often hit deduction and credit limits faster
• State and local tax burdens (especially in high-tax states) compound federal obligations
• Portfolio income, capital gains, and business earnings are more exposed to layered taxes

And while estate laws may stay favorable for now, it’s this very moment of stability that presents the clearest opportunity to act. With that in mind, let’s start with one of the most visible planning opportunities: managing investment income and capital gains.

Capital Gains and Income Tax Management

Capital gains remain one of the biggest drivers of tax exposure, particularly for those with concentrated stock positions, appreciated assets, or recent liquidity events. Even with the top federal long-term rate staying at 20%, the NIIT and state taxes can push the effective rate above 30%.

Smart ways to manage capital gains can include:

• Tax-loss harvesting to offset gains with realized losses
• Tax-efficient fund selection to minimize taxable distributions
• Appreciated asset gifting to shift the tax burden to the recipient
• Installment sales of assets such as real estate to spread tax impact over several years
• Charitable remainder trusts (CRTs) to defer gains while generating income
• Opportunity zone investments for deferrals and exclusions under certain conditions

The bottom line? Having a flexible, forward-thinking strategy for capitals gains can provide greater control and efficiency over time.

And just as capital gains can create complexity, so too can your estate plan—especially when it comes to long-term wealth transfer.

Estate and Gift Tax Exemption Planning

Perhaps one of the most impactful provisions for high-net-worth families is the preservation of the high federal estate and gift tax exemption (which will increase to $15 million per person).

But rather than encouraging delay, this extension opens a broader runway for thoughtful wealth transfer planning. High-net-worth families can:

• Gift appreciating assets now to lock in current exemption amounts
• Establish a Spousal Lifetime Access Trust (SLAT) to use your exemption while retaining indirect access
• Use an Irrevocable Life Insurance Trust (ILIT) to keep insurance proceeds outside your estate
• Apply valuation discounts for business or real estate interests to reduce taxable value

It’s a chance to implement strategies with less pressure and more impact. And while estate planning helps with what you pass on, Roth conversions remain a powerful way to shape how you’ll draw income during your lifetime.

Roth Conversions: Still a Timely Strategy

Roth conversions continue to be a powerful long-term tax planning tool—especially for investors expecting higher income or higher tax rates in the future. With the possibility of tax hikes now off the table (for now), it may be the perfect time to act while current rates are still on your side.

By moving assets from a traditional IRA to a Roth IRA, you pay taxes now in exchange for future tax-free growth and withdrawals. Here’s when Roth conversions typically make sense:

• You’re in a lower tax bracket now than you expect in retirement
• You’ve recently retired and haven’t started taking Required Minimum Distributions (RMDs)
• You want to leave tax-free income to heirs
• You’re managing taxable income to stay under Medicare surcharge thresholds (IRMAA)

Rather than converting all at once, many investors take a multi-year approach, spreading out the income impact and managing tax brackets more effectively.

But of course, tax strategy isn’t only about reducing liability. It’s also about aligning your plan with your values. That’s where charitable giving comes into play.

Charitable Giving as a Planning Tool

Charitable giving offers a meaningful way to support the causes you care about while also gaining potential tax advantages. With the right structure, philanthropy can become an integral part of your long-term financial and estate plan.

Smart charitable strategies can include:

• Donor-Advised Funds (DAFs) to receive an immediate tax deduction with long-term giving flexibility
• Gifting appreciated securities to avoid capital gains and get a full deduction
• Charitable remainder trusts (CRTs) to generate income while ultimately donating the remainder
• “Bunching” donations to combine multiple years of gifts to exceed the standard deduction threshold

These strategies are especially powerful when used in concert with broader wealth and tax planning efforts. Still, to maximize impact, timing matters—which is where a multi-year perspective can offer added value.

The Case for Multi-Year Planning

Rather than focusing on short-term wins, high-net-worth investors typically benefit most from planning several years ahead. Whether you’re preparing for a liquidity event, approaching retirement, or managing a business transition, having a roadmap for the next three to five years can significantly reduce your lifetime tax burden.

Multi-year tax planning allows you to:

• Smooth out taxable income and manage brackets
• Optimize the timing of asset sales or Roth conversions
• Prepare for estate tax changes before new laws take effect
• Coordinate with other planning areas like retirement, business succession, or charitable giving

This broader perspective provides more flexibility and fewer surprises while also helping ensure your tax strategy evolves in tandem with your life and goals.

Final Thoughts

Tax laws may change, but the need for thoughtful, forward-looking planning is constant. While no one can predict exactly how the landscape will evolve, waiting for ‘certainty’ often means missing valuable opportunities. By building a flexible tax strategy today—one that anticipates both your goals and potential policy shifts—you’ll be better positioned to reduce risk, increase after-tax returns, and preserve more of what you’ve worked so hard to build.

If you're ready to revisit your strategy or explore more advanced planning opportunities, reach out to our team. With careful, proactive tax planning, you can stay ahead of the curve and keep more of your wealth working for your future.

The information presented is for educational purposes only and is not intended to be a comprehensive analysis of the topics discussed. It should not be interpreted as personalized investment advice or relied upon as such.

Allworth Financial, LP (“Allworth”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of the information presented. While efforts are made to ensure the information’s accuracy, it is subject to change without notice. Allworth conducts a reasonable inquiry to determine that information provided by third party sources is reasonable, but cannot guarantee its accuracy or completeness. Opinions expressed are also subject to change without notice and should not be construed as investment advice.

The information is not intended to convey any implicit or explicit guarantee or sense of assurance that, if followed, any investment strategies referenced will produce a positive or desired outcome. All investments involve risk, including the potential loss of principal. There can be no assurance that any investment strategy or decision will achieve its intended objectives or result in a positive return. It is important to carefully consider your investment goals, risk tolerance, and seek professional advice before making any investment decisions.