For many high-net-worth individuals (HNWIs), taxes may represent one of the largest lifetime expenses. While investment returns are critical, the real measure of wealth accumulation is not just what you earn, but what you keep. As your wealth grows, the complexity of your tax situation typically increases, and without thoughtful planning, taxes can begin to erode returns over time.
At Moran Wealth Management®, we believe that tax planning is not merely an annual compliance exercise but a foundational element of a Comprehensive Private Wealth Management strategy. We view tax efficiency as a year-round discipline, integrated into the construction and ongoing management of a portfolio designed to support multi-generational goals. Our team of experienced professionals focuses on implementing proactive strategies that seek to preserve capital and minimize the drag of taxes on your long-term growth.
Asset Location: Placing Investments Where They Belong
One of the most effective, yet often overlooked, methods of tax optimization is asset location. While asset allocation determines what you own (for example, stocks versus bonds), asset location determines where you hold those investments.
Different account types are subject to different tax treatments, and aligning the right investments with the right accounts may help improve after-tax returns without increasing your overall market risk.
- Taxable Accounts: These accounts are generally subject to capital gains taxes and taxes on dividends and interest. They are often best suited for more “tax-efficient” assets, such as broad-market ETFs or municipal bonds, which may generate income that is federally tax-advantaged.
- Tax-Deferred Accounts (Traditional IRAs / 401(k)s): In these accounts, taxes are typically paid when you withdraw funds. They are often appropriate for more “tax-inefficient” assets – investments that generate higher levels of ordinary income, such as high-yield bonds or Real Estate Investment Trusts (REITs). By sheltering this income, you may defer the associated tax liability.
- Tax-Free Accounts (Roth IRAs): Funded with after-tax dollars, these accounts offer the potential for tax-free growth and qualified withdrawals. Placing assets with the highest expected long-term growth in these accounts can be a powerful component of a long-term wealth strategy.
Thoughtful asset location requires a detailed review of your specific holdings and objectives. We structure portfolios with the goal of shielding your highest-taxed assets where possible while maintaining your target risk profile and overall investment strategy.
Tax-Loss Harvesting: Turning Market Volatility into Opportunity
Market volatility is inevitable, but for the prepared investor it can create an opportunity to enhance tax efficiency through tax-loss harvesting.
Tax-loss harvesting involves selling an investment that has declined in value to realize a capital loss. This realized loss can then be used to offset capital gains realized elsewhere in your portfolio. As of January 2026, if capital losses exceed capital gains, individuals may generally deduct the excess loss against ordinary income up to $3,000 per year ($1,500 if married filing separately), with remaining losses carried forward to future years (subject to IRS rules and future law changes).
The basic framework involves:
- The Strategy: Sell the asset to realize (or “harvest”) the loss.
- The Replacement: Immediately purchase a similar, but not “substantially identical”, investment to maintain your desired market exposure.
- The Result: You stay invested according to your long-term strategy while seeking to reduce your current tax liability.
This discipline seeks to turn certain market declines into a potential long-term tax benefit, though results depend on individual tax circumstances and market conditions. However, execution is critical. It requires a structured process that supports your Long-Term Wealth Plan and careful attention to the “wash sale” rule, which can disallow the deduction if the guidelines are not followed properly. Our role is to support the thoughtful integration of tax-loss harvesting into your broader investment strategy and long-term wealth plan, in coordination with your tax professional.
Strategic Charitable Giving
For many of our clients, philanthropy is a defining priority. Integrating charitable giving into your financial plan can allow you to support the organizations and causes you value while potentially creating meaningful tax benefits.
Simply writing a check is straightforward, but in some cases may be less tax-efficient for HNWIs than other gifting strategies. Gifting appreciated securities, such as stocks, bonds, or mutual funds held for more than one year, can often be a more effective strategy:
- Avoid Capital Gains Tax: When you donate appreciated securities directly to a qualified charity, you generally do not pay capital gains tax on the appreciation.
- Potential Tax Deduction: You may be eligible for a charitable income tax deduction based on the asset’s fair market value, subject to applicable limits.
Donor-Advised Funds (DAFs) can further enhance this strategy. A DAF allows you to make a large, irrevocable contribution in a single high-income year, potentially securing an immediate tax deduction, while recommending grants to charities over time. Contributions to DAFs are irrevocable, and sponsoring organizations may charge administrative and investment management fees.
This structure can effectively “bunch” your charitable deductions for maximum impact, aligning your giving strategy with both your values and your tax planning objectives.
Estate Planning and Tax Implications
Preserving a legacy requires navigating the complex interaction of federal estate taxes, gift taxes, and other transfer tax considerations. For families with significant assets, the federal estate tax exemption is a critical threshold; assets above this amount may be taxed at rates that can materially reduce what ultimately passes to heirs.
Effective strategies often focus on reducing the size of the taxable estate during your lifetime and managing how future appreciation is treated. Common approaches may include:
- Annual Exclusion Gifts: Leveraging the annual gift tax exclusion to transfer wealth tax-efficiently to family members or other beneficiaries.
- Trust Structures: Using tools such as Irrevocable Life Insurance Trusts (ILITs) or Grantor Retained Annuity Trusts (GRATs) to move future appreciation out of the estate and potentially reduce estate tax exposure.
Tax efficiency in this context is closely connected to The Role of Estate Planning in Wealth Preservation. We collaborate with your estate planning attorneys and other professionals to help structure your assets in a way that seeks to minimize transfer taxes and support a smooth, intentional transition of wealth to the next generation.
Navigating Alternative Investment Tax Structures
High-net-worth portfolios often include allocations to alternative investments, such as private equity, private credit, hedge funds, or direct real estate. While these asset classes can offer diversification and return potential, they also introduce unique tax and reporting considerations.
Many alternative investments are structured as partnerships. As a result, investors typically receive a Schedule K-1 rather than a standard Form 1099. K-1s can pass through various types of income, deductions, and credits, including:
- Unrelated Business Taxable Income (UBTI): Which can create tax issues if the investment is held within certain tax-advantaged accounts, such as IRAs.
- Multi-Jurisdictional Obligations: Investors may be required to file tax returns in multiple states where the partnership conducts business.
These complexities mean that the true, after-tax return of an alternative investment may look different from its headline performance. Alternative investments are not suitable for all investors, often have limited liquidity or long lock-up periods, and are typically available only to qualified or accredited investors.
We work with clients to evaluate both the investment and tax dimensions, helping to assess whether the additional complexity aligns with their broader strategy and whether the potential benefits justify the risks and reporting burden.
The Next Step: Aligning Investment Strategy with Tax Efficiency
Tax laws are intricate and subject to change, and their impact on high-net-worth families can be substantial. At Moran Wealth Management®, we work in concert with your CPAs and other tax professionals to design and implement investment strategies that seek to maximize after-tax outcomes, rather than focusing on pre-tax returns alone.
Schedule a consultation to discuss your tax-efficient portfolio.
The information provided herein is for educational and informational purposes only and should not be construed as individualized investment advice, tax advice, or legal advice. Moran Wealth Management® (“MWM”) does not provide legal or tax advice. Clients and prospective clients should consult with their tax professional, accountant, or attorney regarding their specifi c circumstances and the applicability of the strategies described. The tax strategies referenced may not be suitable for all investors and are subject to change based on current tax law, which may change at any time and without notice.
Investment strategies, including tax-loss harvesting, asset location, alternative investments, and charitable giving strategies, involve risk, including the possible loss of principal. There is no guarantee that any strategy will be successful, reduce taxes, improve returns, or achieve any particular investment or fi nancial objective. Past performance is not indicative of future results.
Alternative investments may carry additional risks such as illiquidity, long holding periods, complex tax treatment, and are often available only to qualifi ed or accredited investors. Municipal bond interest may be subject to state and local taxes and the alternative minimum tax (AMT).
Any opinions or forward-looking statements are based on current market conditions and are subject to change without notice. All examples provided are hypothetical and for illustrative purposes only.