By: Wilmington Trust

Comprehensive wealth management is similar to owning a racecar. The management of your money is the engine. How that money is owned is the vehicle. The best engine in the wrong vehicle will lose the race. A well-designed vehicle can improve the performance of the engine and speed of the car. Comprehensive wealth management will give you the ability to match the best engine with the best vehicle for increased performance to reach your financial goals.

Four vehicles that can improve your total investment return are:

• Valuation Reduction: Assets in a taxable estate are taxed on their fair market value at the date of transfer. If you can reduce the value, you will reduce the tax. Assets placed into a family limited partnership will decrease in market value because of their lack of marketability.
• Appreciation Shifting: Removing the future growth of assets from your taxable estate will let you pass on more money to your heirs while you're living and reduce your current income taxes. Strategies can be used that will allow you to continue to receive economic benefits from those assets. You will also be able to take advantage of down markets and freeze the current value of your estate at a discount.
• Tax Deductions: Certain strategies may be used to reduce your current income taxes and provide tax deferral on the growth of your assets. Charitable trusts are split between your family and a private foundation. This can be a highly leveraged transaction when used with a dynasty trust.
• Wealth Replacement: Your estate taxes will be due nine months from the date of your death. It is important to have a pool of funds immediately available to meet this need. The assets - for example, cash, stocks, bonds, or life insurance - could be owned by a separate irrevocable trust to keep the money out of your taxable estate. A dynasty trust could be used to provide income, tax-free growth, and protection from creditors.

The potential after-tax returns for you and your family are dramatic and can range from 20 to over 100 percent. These returns are not produced by the careful selection of money managers - the engines - but by the proper selection of highly leveraged vehicles.

Consider the alternative: What increased rate of return would your assets need to achieve to match the after-tax return of choosing the right vehicle? Many investors look at their portfolios every day and review them in detail at least quarterly. How often do they review the vehicles that own those investments? Have you spent most of your time focusing on the wrong end of your investments? Remember, it not only matters how much you make - but also how much you keep and pass on to your heirs.

Updated: January 1, 2013

This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.
© 2013 Wilmington Trust Corporation.