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Welcome to the AICPA's Personal Financial Planning Podcast. This is Andrea Miller. On behalf of the AICPA Personal Financial Planning Division, the home for professional personal financial planners, we're happy to bring you insights from experts in tax, retirement estate investment, risk management, practice management and client relationships. We'll be releasing episodes the second and fourth Friday of each month beginning in February. Be sure to Visit us@aicpa.org Pfp for more resources and tools designed to help you guide your clients. And now, over to our guest.

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Thank you, Andrea. This is Debbie Taylor and I'm here to talk with you about follow ups from my April 22 webinar on planning tips for 2024. We talked about our service calendar, which we have built out around the theme of Evergreen service for Evergreen fees. And so we have a very extensive service calendar that outlines every season the services that clients will get, what the deliverables are, the analysis, the outreach. And that service calendar is a great opportunity for you and your team to create structure and training and predictability and to be proactive. It's a great opportunity with prospects to set forth the services that you are going to provide to them. And it's great with your existing clients to share with them what you are delivering, when you are delivering it. And also if they want a change, right, if they don't want to wait until May to get their financial planning update, they can let you know things like that. So I did record two other podcasts as followups based on the questions that came in. And this is my third podcast in connection with that webinar. But I encourage you to listen to the webinar first because that creates the foundation here. What we're going to talk about today is tax planning. And so I did record a podcast that focused on some of the basics of the tax planning. And I encourage you to listen to that podcast. It's about 20 minutes and I talk about the basics of a great retirement income plan. And a fifth aspect of that, of the basics is that you want to increase wealth by decreasing taxes. And of course, that's the part that we're focusing on here. And then I also discussed the six principles of tax planning and essentially what those basic principles were. And so today what we're going to talk about is some of the definitions and some of the key strategies. And so to be clear, before we can get into the strategies, before we can do anything, we must know the how, right? I can talk in theory of oh, this strategy, that strategy. But you're like, okay, Debbie, how Are you going to do that? And gone are the days where we have a pen and paper. Right. And even spreadsheets have become somewhat archaic and rudimentary. And so we have software that enables us to do this type of work. We use HolistaPlan. And HolistaPlan has the highest customer service rating in the industry and has the highest adoption rate for financial advisors by far. And full disclosure, I do work with holistaplan on their monthly webinars. We have found it to be absolutely revolutionary for the industry. Before we hop in to the key strategies underlying tax planning, right. We've got to cover the basic of the how. Right? How. How do I do this? Right. Do I pull out a piece of paper? What do I do? Can E Money do this for me? No. Money guy. No. Right. Okay. So number one, you must collect the tax return. Okay. Number one, you must collect the tax returns. Too many advisors pretend to do tax planning, but they don't even collect the tax returns. Or they collect it once when a client first comes on board. Right? That's not tax planning. When you collect the tax return once as part of the onboarding process and you give it a once over. Right. That's not tax planning. That's doing some very basic intake and checking a box. So number one, we've got to collect the tax return and you need a system behind collecting the tax return. We send out over 30 requests each year to try to collect those tax returns. And I can tell you by the time November comes, we have collected almost all of the tax returns for our top clients. We send out one to all communications is what we call it. We include it in our weekly newsletter. We will do individualized emails near the end, like around September, October, and even phone calls. So you need to collect the tax returns and you need to have a process around that. Number two of the five must dos is you've got to run that tax return through your diagnostic Software. We use HolistaPlan. You have to run it through software if you're going to sit there by hand and try to analyze a tax return. That has become a fool's errand and a waste of time. Now, for years I did that. I had the AICPA checklist. It is an incredibly thorough checklist. And for years I relied upon the AICPA checklist. But why walk somewhere when you can drive a car? Why drive a car when you can fly? Sometimes, yes, you want to do it that way, but you get my point. This software, within 30 seconds has analyzed the entire tax return for you and pointed out observations that will be very helpful to you in taking your next step. It basically creates the foundation for your analysis, for your planning. Now, if you want to leverage the AICPA checklist, by all means, but do it in conjunction with the software. And by the way, the software literally pays for itself after you've used it three or four times. Okay, step three, once we collect the tax returns and run it through the software, number three is we generate the tax report and we review the tax report. We look to see what the observations are, what has been pointed out to us, what is of note, what's not consistent, what are the trends. And this is where you could use the AICPA checklist if you chose for item four is once we've run the software, reviewed the report from the software and the observations, now we communicate with the client. I do not feel comfortable just sending that report to the client. I feel that client may not understand it, might not read it. Some clients might, others might not. So we have a cover letter that addresses all of the key factors that are brought forth in the report. And so the COVID letter is several pages long, and it addresses the income that the client probably took, the standard deduction, the different deductions that were taken, whether they took advantage of the safe harbor. And then it will also go on to address QCDs, RMDs and so on. So you want to share that analysis with the client. Now, we have a rule in our office that the analysis needs to go out within seven to 10 days of collecting the tax return. Once years ago, I sat on a panel and he's like, oh, yes, we get the tax returns and we wait for the client to come in for a meeting, and that's when we talk about the tax return. Well, what if your client doesn't come in for a meeting? What if they don't come in until six months from now? Are you just sitting on the tax return for six months or forever? And my theory with this is that if a client takes the time to send you something, then you need to take the time to get back to them. Otherwise, you're sending them a message that their time is not so valued that there wasn't an urgency behind this. So do not wait for the meetings. In fact, I tie very few services to the meetings. I don't believe in that. Some clients don't come in for meetings anymore. Some come in infrequently, and you want to drive down some of these needless meetings. Okay, so ideally then you want this ongoing Dialogue with your clients year round instead of holding on to things, whether it's trades, rebalancing, tax return reviews, don't hold on to these things for the meetings. Just continue the dialogue. Right? Continue the service. And that's where that annual service calendar comes from that we talked about in the April 22 webinar. The fifth and final must do for tax planning is considering the long term and strategic planning opportunities. So the fourth must do, like I just reviewed, is communicating the analysis with the clients. And in that analysis, you're addressing tactical opportunities. Hey, did you realize that you overpaid and you're getting this big refund back? Right? That's a little bit more tactical, right? I think of tactical as things that you do within the next couple of months or within the next year. A little bit more tactical. So we do that in that cover email. But then I also want to take a step back and think about the strategic, the long term planning opportunities. Right? How can we set this client up to save hundreds of thousands of dollars or millions of dollars during their lifetime? How can we set up their children? How does the secure act affect this family with the large ira? Right? So those are the more strategic opportunities. Should we be doing Roth conversion not just to the tax bracket? Right. Because that's an arbitrary number. 10%, 12%, 22, 24. The are arbitrary numbers. Tax bracket management with Roth conversions, I think makes no sense unless you're at maybe the 10 or 12% tax bracket. But Roth conversions should be done in a much more thoughtful way, tied into current tax rates versus future tax rates for this client and trying to arbitrage. And let's look then at long term planning opportunities and let's address those. Okay? Once we cover the five must dos for tax planning, these are just the basic mechanics, like physically uploading the tax return, running it through the diagnostic software, which is our version of a blood test. Would a doctor try to treat you without a blood test? Absolutely not. Doc, I'm busy. I'm this, I'm that. They'd be like, fine, go get the blood test, go get the blood work and that's when I can help you. Same thing with the tax return. I refuse to do tax planning without the tax return. All right, so now let's hop in and let's talk about 20 key strategies underlying tax planning. And so the thinking here is not every strategy is going to make sense for every person. We know that tax planning is highly customized. And we talked about that in the previous podcast when I talked about six principles of tax planning. Part of it is it's highly customized, which is why it's not getting done, because it's not scalable, it's not easy, you have to be thoughtful and it looks different for everybody. Right? And so with that, then I'm going to quickly go through the 20 key strategies. Number one, Roth conversions, Roth contributions, backdoor Roth conversions and otherwise. Reviewing Roth account opportunities, particularly while tax rates are low. Number one is taking advantage of Roth opportunities and after tax accounts. Number two, intergenerational tax arbitrage in the form of gifting strategies and the use of trusts to manage estate tax concerns. Also the use of trusts to protect against creditors and creditors. And part of this also is asset transfers, whether it's gifting trusts, intergenerational loans, what have you. Number three of the 20, life event planning and deathbed planning. Taking advantage of that step up in basics and possibly transferring ownership around family members to take advantage of some tax arbitrage. Number four, protecting against the widow's penalty. Every couple that comes to you has a widow penalty problem. Every couple, because eventually one of them is going to be the last person standing. So we need to address this with every single client. Number five, have knowledge of tax opportunities from federal and state government and through the employer. Maximize retirement account contributions. Strategize optimal contributions and locations to ideally maximize after tax and Roth accounts. Take advantage of employer sponsored tax benefits. Maximizing contribution to tax deferred vehicles, including 401k IRAs and annuities where appropriate. So some of this might have seemed somewhat contradictory because on the one hand I'm saying maximize after tax accounts and Roth. On the other hand I'm saying maximize deferral opportunities. But again, highly customized. Depends on your client. Maybe we're doing both. Maybe we're contributing to the Roth and to the IRA and the 401k traditional. Item 6, take advantage of legacy and beneficiary planning. Review of beneficiary account designations. Review education planning, charitable gifts and trusts. So the idea here is benefiting our loved ones and also the causes we care about and how are we planning around that. Item seven, managing tax trade offs income versus estate taxes. Whether we want to pay taxes now or later, considering state versus federal taxes and also considering which generation should be paying the taxes. Do mom and dad want to pay the taxes for the kids? For example? Number eight, having an accumulation strategy and an accumulation location strategy. Taking into account the eventual distribution strategy. Creating tax diversification among pre tax and post tax accounts to build three types of accounts. Pay now, pay later or never pay with an emphasis on the ladder, the diversification of investment registrations and the idea here is to build a firm foundation so that when your clients get to the retirement and withdrawal stage, they ultimately can have some diversification from where they can withdraw. Item 9 Optimizing asset location where to place specific investments across taxable and tax deferred accounts to drive down the annual tax bill and to maximize overall after tax wealth over the long term. Item 10 is the review of underlying investments for tax inefficiency such as high turnover or mutual funds with big capital gains distributions, choosing investment products and solutions specifically aligned with the individual's particular tax situation and situation in life. Item 11 Adept and year round tax loss trading and capital gain harvesting, minimizing capital gains and large one time tax expenses. Item 12 Advanced charitable giving techniques for those who are interested in including QCDS donor advised funds. What entity charitable trusts to make a difference, creating a stream of income and or driving down taxes. Item 13 Income distribution strategies that maximize after tax income in retirement, setting up RMDs and distribution planning early in the year, possibly taking distributions from traditional retirement accounts and combining them with distributions from taxable or Roth accounts and QCDS distribution location optimization. Item 14 when to realize income to maximize after tax income in retirement tax implications of savings and spendings, accumulation stages and withdrawals and Social Security collection strategies. Item 15 of the 20 tax bracket management, particularly for lower tax brackets. Item 16 reviewing the bumps Social Security that 85% taxation, kicking in Medicare IRMAA surcharges and the net investment income tax. Item 17 Estate planning and reviewing estate taxes versus income taxes and considering family goals. Item 18 Considering miscellaneous strategies such as moving to a low tax state, filing status review, review of other tax benefits and considering timing of retiring. Item 19 Family Wealth Protection planning and trusts to protect against creditors and creditors and item 20 is family risk management and wealth preservation. In this instance it's reviewing insurance as a savings and wealth retention vehicle, protection against catastrophic events, providing post death income, paying estate taxes and funding life insurance retirement plans. So those are 20 tax planning strategies. And yes, there is some overlap. I tried to separate them, but there is some overlap, understandably. And the idea here then is when you sit with clients you should be well aware of these 20 strategies. These are all tools in your toolkit and you then determine which of these strategies or tools are pulled out. And you might be using some of these strategies one year for the client, different strategies the next year, and so on. But the idea here is it takes more than implementing one of these concepts to increase your client's tax alpha, your approach must be comprehensive and address all aspects of tax intelligence planning to achieve maximum results. It's important to recognize that every client will need to confront these topics at some point in their financial lives, and your expertise will set you apart. Taxes are an integral part of every financial planning and investment decision that you make, so you need to view every decision through a tax lens. I'm not saying solely taxes, I'm not saying make an investment decision 100% on taxes. But what I'm saying is that tax planning should always have a seat at the table. And to end this, then we know that $600 billion a year is being sent to the government that belongs in your client's pockets. According to Vanguard, a comprehensive financial Advisor can bring 3% of additional returns a year to the client. I've seen data where it's 1.2%. I think the 3% could be low depending on the year, depending on the work that's being done and the type of client. But you get the point. Savvy tax planning can more than pay for your fee several times over and save hundreds of thousands of dollars or millions of dollars in a client's life. So my question to you is, why settle for average when you know better? So with that, then go forth and be bold. Bring these services to your clients. I have my 90 minute webinar from April 22 and then three podcasts that I recorded to follow up on that webinar and go in deeper on additional ideas and connections. So please listen to my podcast and go out there and just be the best advisor that you can be. On behalf of the PFP section, this has been Debbie Taylor and I hope you enjoyed this podcast. For more resources related to this topic, check out the Advisor's Guide to Financial and Estate Planning that is exclusive for PFP section members. Stay tuned for Andrea who will tell you how to find this content and and thank you for listening and thank.