Tax planning is central to wealth management. Tax-loss harvesting allows investors to offset unlimited capital gains plus up to $3,000 of ordinary income annually. The wash-sale rule bars recognizing a capital loss if the taxpayer repurchases a substantially identical security within a 61-day window (30 days before, day of sale, 30 days after).
Business entity selection affects tax liability and asset protection. S-Corporations and Limited Liability Companies (LLCs) offer pass-through taxation, avoiding the double taxation of traditional C-Corporations. S-Corps are limited to 100 allowable shareholders who must be U.S. citizens or resident aliens, and may issue only one class of stock.
Estate planning directs the disposition of wealth while minimizing probate delays and transfer taxes. A step-up in basis eliminates unrealized capital gains at death by resetting the basis of inherited assets to fair market value. Revocable living trusts avoid probate while preserving grantor control, but remain subject to estate taxation.