PT  - JOURNAL ARTICLE
AU  - Nathan Sosner
AU  - Joseph Liberman
AU  - Steven Liu
TI  - Integration of Income and Estate Tax Planning
AID  - 10.3905/jwm.2021.1.134
DP  - 2021 Mar 19
TA  - The Journal of Wealth Management
PG  - jwm.2021.1.134
4099  - https://pm-research.com/content/early/2021/03/19/jwm.2021.1.134.short
4100  - https://pm-research.com/content/early/2021/03/19/jwm.2021.1.134.full
AB  - The preservation and transfer of wealth to future generations are among the central financial goals for most high-net-worth families. Using a stylized theoretical model and Monte Carlo simulations, this article quantifies the benefits of income and estate tax planning for growing wealth over generations. The article shows that a family that invests with income and estate tax efficiency in mind can achieve substantially higher wealth levels than a family oblivious to taxes. More important, the article demonstrates that a significant value accrues from integrating income tax efficiency and estate tax planning: Becoming efficient with respect to one tax should make the family even more eager to become efficient with respect to the other.TOPICS: Wealth management, simulations, portfolio management/multi-asset allocation, performance measurementKey Findings▪ Using a stylized theoretical model and Monte Carlo simulations, this article quantifies the benefits of income and estate tax planning for growing wealth over generations. The article shows that a family that invests with income and estate tax efficiency in mind can achieve substantially higher wealth levels than a family oblivious to taxes.▪ The article demonstrates that a significant value accrues from integrating income tax efficiency and estate tax planning: Becoming efficient with respect to one tax should make the family even more eager to become efficient with respect to the other.▪ Our conclusions are robust to moderate declines in pre-tax returns, which might occur in pursuit of tax-efficient investing, and to significant increases in statutory annuity rates involved in estate tax planning techniques.