Call Our Office
(559) 384-2900 | Fresno
(619) 480-1413 | San Diego
(619) 480-1413 | San Diego
Your Money
Your Life
Your Way
You are now leaving the Strong Valley Wealth & Pension, LLC ("Strong Valley") website. By clicking on the "Schwab Alliance Access" link below you will be entering the Charles Schwab & Co., Inc. (“Schwab”) Website. Schwab is a registered broker-dealer, and is not affiliated with Strong Valley or any advisor(s) whose name(s) appears on this Website. Strong Valley is/are independently owned and operated. Schwab neither endorses nor recommends Strong Valley. Regardless of any referral or recommendation, Schwab does not endorse or recommend the investment strategy of any advisor. Schwab has agreements with Strong Valley under which Schwab provides Strong Valley with services related to your account. Schwab does not review the Strong Valley website(s), and makes no representation regarding the content of the Website(s). The information contained in the Strong Valley website should not be considered to be either a recommendation by Schwab or a solicitation of any offer to purchase or sell any securities.
Capital gains taxes might sound like a complex financial term reserved for Wall Street tycoons, but in reality, they touch most investors and many homeowners. Whether you're selling stocks, a piece of real estate, or that vintage baseball card collection, understanding capital gains taxes can help you make smarter decisions and keep more money in your pocket.
Understanding Capital Gains
At its core, a capital gain is the profit made from the sale of an investment or real estate. For instance, if someone buys an asset for $1,000 and later sells it for $1,500, there is a capital gain of $500.
These gains are categorized in two ways:
The Importance of Planning
Why does this distinction between short-term and long-term matter? Because the tax implications can be substantial. For many taxpayers, long-term capital gains are taxed at a more favorable rate than short-term gains. Thus, holding onto an asset for just a bit longer (say, 13 months instead of 11) could lead to a significantly lower tax bill.
It's important to look at the net profit (after taxes) when considering a sale. This underscores the critical nature of tax planning as an integral part of investment strategy.
Exceptions and Exclusions
There are specific cases where the capital gains tax has exemptions or special rules. A notable example is the sale of a primary residence. If the seller meets certain requirements, then some of the gains might be excluded from taxes. However, this doesn't apply to rental or second properties.
Strategies to Minimize Capital Gains Taxes
Wait it Out: As mentioned previously, holding onto investments for more than a year moves them into the long-term category, often resulting in lower taxes.
Tax-Loss Harvesting: This involves selling securities at a loss to offset capital gains in other areas. It can be a strategic move, especially in a down market.
Gift Assets: Instead of selling assets, consider gifting them. While there are limits, this can be a way to transfer value without triggering capital gains taxes.
Maximize Tax-Advantaged Accounts: Utilize accounts like 401(k)s or IRAs, where investments grow tax-free or tax-deferred.
Stay Current: Tax laws can change. Check with your financial and tax professionals to ensure you're up to date with the latest rules and rates.
Be Proactive
While taxes are inevitable, the weight of their impact may be controllable. By understanding the nuances of capital gains taxes and making informed decisions, you can optimize your financial outcomes.
Remember, it's not just about what you make, but also what you keep. A proactive approach today can lead to fruitful savings tomorrow.
One of the most overlooked but critical areas of retirement planning is tax efficiency. After all, it’s not just what you earn – it’s what you keep. For many retirees, smart tax planning can extend the life of a portfolio, reduce Medicare costs, and help avoid paying unnecessary taxes on Social Security benefits.
New Tax Landscape in 2025
Recent updates to the tax code have increased the standard deduction for individuals and married couples, aged 65 and older. These increases simplify filing and reduce taxable income for many retirees – but they also open the door to more nuanced tax planning strategies, especially when drawing income from a mix of taxable, tax-deferred, and tax-free accounts.
Top Tax Reduction Strategies for Retirees
1. Roth Conversions. Converting assets from a traditional IRA to a Roth IRA during low-income years can help reduce Required Minimum Distributions (RMDs) in future years and create a pool of tax-free retirement income. Partial conversions – done strategically over multiple years – can minimize the risk of bumping into higher tax brackets or triggering Medicare IRMAA surcharges.
2. Long-Term Capital Gains Harvesting. The 0% federal long-term capital gains tax bracket for taxable income increased for both individuals as well as married couples for 2025. This presents a unique opportunity for retirees to sell appreciated assets and rebalance portfolios without triggering capital gains taxes – provided they remain within the income thresholds. Check with a financial professional to see if this is would be beneficial.
3. Qualified Charitable Distributions (QCDs). For those who are aged 70½ or older, with significant resources, there’s an opportunity to make large donations, annually, from an IRA directly to a qualified charity. This counts towards the RMD and excludes the donated amount from taxable income. It’s a smart way to support important causes while lowering the tax bill. For additional details check with a trusted advisor.
4. Asset Location Optimization. Where investments are held matters. Tax-inefficient holdings like bonds or REITs may be better suited for tax-deferred accounts, while long-term equity investments may belong in taxable accounts where favorable capital gains rates apply. This allocation can reduce annual tax drag and boost after-tax returns over time.
5. Withdrawal Sequencing. The order in which to draw down assets can dramatically affect the tax burden over a lifetime. A common guideline is to first withdraw from taxable accounts, then tax-deferred accounts (like IRAs and 401(k)s), and finally Roth accounts. This approach defers taxable income and preserves tax-free growth longer.
Tax Planning is Year-Round, Not Just in April
Effective tax planning doesn’t begin in March and end in April – it’s a year-round discipline. Retirees should monitor not only their income levels, but also market conditions and policy changes that can affect tax thresholds. Year-end rebalancing, mid-year Roth conversions, and early-in-the-year QCD planning can all work together to ensure a retiree keeps more of their hard-earned savings.
Work with a financial advisor and tax professional to customize your plan and make proactive moves rather than reactive ones. With inflation threatening, healthcare costs rising, and income sources increasingly diverse, efficient tax strategy is one of the most powerful tools in your retirement toolkit.
As retirement planning becomes increasingly complex, one vehicle is gaining attention for its potent blend of savings and tax advantages: the Health Savings Account (HSA), often dubbed the "medical IRA." This unique account stands out in the financial landscape for its triple-tax benefits, making it an essential tool for individuals aiming to secure their medical and financial well-being in retirement.
The HSA is more than just a savings account. It's a strategic investment platform that, under certain conditions, allows for tax-free contributions, growth, and withdrawals. To be eligible, one must be enrolled in a high-deductible health plan (HDHP) among other criteria. The HSA can cover a wide range of qualified medical expenses prior to age 65, including doctor visits, dental and vision care, and prescriptions, making it a versatile asset in managing healthcare costs.
Tax-Deductible Contributions: Contributions to an HSA are made with pre-tax dollars, effectively reducing your taxable income. This immediate tax break can yield significant savings, lowering your overall tax bill.
Tax-Free Growth: The funds within an HSA grow tax-free. This means any interest, dividends, or capital gains accumulate without being subject to taxes, allowing the account to grow more rapidly.
Tax-Free Withdrawals for Medical Expenses: Withdrawals from an HSA for qualified medical expenses are tax-free, even in retirement. This benefit is particularly valuable as healthcare costs often become a more significant part of household spending in later years.
Maximize Contributions: The limit is several thousand dollars for an individual (and nearly double for families), and it usually increases each calendar year. There is also a catch-up contribution for those aged 55 and older. Maximizing contributions can enhance tax savings and provide a larger fund for future medical expenses.
Invest Wisely: Many HSAs offer investment options similar to those found in retirement accounts. By investing the HSA funds, it can potentially increase the growth rate, turning it into a powerful tool for retirement savings.
Plan for the Long Term: Instead of using the HSA for current medical expenses, consider paying out-of-pocket, if able, allowing the HSA to grow over time. This strategy can build a substantial tax-free fund for healthcare costs in retirement.
Understand the Rules: After age 65, funds can be withdrawn from the HSA for non-medical expenses without penalty, but these withdrawals will be taxed as income. However, medical expenses remain tax-free, underscoring the HSA's role as an important retirement healthcare fund.
International stocks continue to lead in 2025, due to a weaker U.S. dollar. Domestically, the Mag-7 have pulled just slightly ahead. And what will interest rate cuts mean for short-term bonds? Rate cuts may impact short and long-term bonds differently, take a look!
If you are an inventor, author, artist, or owner of a closely held business, you may have already taken steps to help protect your intellectual property rights. Certain types of intellectual property, such as business ideas, visual art, published or unpublished literary and musical works, inventions, computer programs, and designs of clothing and architecture, may be protected by law through copyrights, patents, and trademarks. When planning your estate, carefully consider these valuable assets to help ensure that they are transferred to your heirs according to your wishes upon your death.
Intellectual property is a unique asset, as it is an expression of an individual’s knowledge and ideas. While not simply a thought itself, intellectual property is an intangible asset that is the direct result of work or trade. Just as no two individuals think alike, each estate that owns intellectual property must be handled differently. This area of estate planning is continually evolving, particularly as intellectual capital continues to gain significance throughout commerce in general.
Initially, it is important to determine if the intellectual property can be passed down to heirs. Certain types of intellectual property may have inherent renewal or termination rights through copyrights, patents, and trademarks. This can create questions as to when intellectual property rights become transferrable. To address these concerns, some intellectual property owners choose a second executor to handle intellectual property issues in their estates. For example, an author may appoint a family member to oversee the general administration of his or her estate, as well as a second person or entity with experience in intellectual property to handle posthumous publications.
The valuation of intellectual property also poses a challenge to estate planning. The Internal Revenue Service (IRS) offers guidelines for some, but not all, types of intellectual property. For instance, the valuation of literary work is based on the copyright’s future earnings potential reduced to its present value. Theoretically, this valuation methodology may also apply to other types of intellectual property. However, the question may remain as to how far into the future the potential for earnings exists. It may be possible to hire a professional appraiser to help determine the current value of intellectual property and how future trends may affect this value. But, it is also important to choose someone with expertise in the area of intellectual property.
Estate taxation affects individuals with substantial assets, regardless of the type of property that is included in his or her estate. However, intellectual property sometimes creates additional concerns. Just as an executor might be forced to sell a family vacation home solely to pay for estate taxes, a best-selling author may fear that, after his or her death, the future publication rights to an unpublished work will need to be sold for the same reason. If a large portion of an individual’s assets is “intellectual” in nature, this can be a major concern.
Proper estate planning is pivotal in helping to make sure the decedent’s wishes can be implemented. A life insurance policy purchased and owned by an irrevocable life insurance trust (ILIT), if correctly structured and administered, can provide cash at death to help satisfy estate tax obligations. This use of life insurance can provide flexibility in an estate with only a small amount of liquid assets.
Also, if the intellectual property is of significant size, gifting some or all of the property to a recognized charitable organization at death can help to lower estate taxes. The estate of the decedent would receive a charitable contribution deduction against estate taxes based on the fair market value of the gift at death.
Estate planning for intangible assets, such as intellectual property, involves an array of complicated considerations. A basic understanding of the issues involved underscores the need for appropriate planning to help ensure the ultimate distribution of your assets according to your wishes. If you own intellectual property, be sure to consult with your estate planning team, including financial, legal, and tax professionals.
A Special Needs Trust (“SNT”) is a crucial financial tool designed to benefit individuals who rely on needs-based public assistance. These trusts enable beneficiaries to maintain their eligibility for public benefits while receiving additional financial support from an inheritance.
For clients with dependents or loved ones who receive public benefits, an SNT can offer peace of mind and financial security.
Let’s explore the key advantages and functions of Special Needs Trusts.
One of the primary advantages of an SNT is its ability to preserve the beneficiary's eligibility for needs-based public benefits such as Supplemental Security Income (SSI) and Medicaid. Receiving an inheritance directly can disqualify individuals from these crucial benefits due to asset limits.
However, by placing the inheritance in an SNT, the beneficiary can continue to receive public assistance. Importantly, the funds in the SNT are used to supplement, not replace, the benefits provided by public programs.
An SNT does not provide the beneficiary with direct access to the inheritance. Instead, the funds are managed by a trustee, who oversees the trust and disburses funds according to the trust's terms. This arrangement ensures that the client maintains control over the distribution and use of the funds, both during their lifetime and after their death. It also protects the assets from being misused or squandered by the beneficiary.
Clients can appoint a trusted individual or a professional fiduciary to manage the SNT. The trustee is responsible for ensuring that the funds are used for the beneficiary's benefit and according to the trust's terms. This can include paying for medical expenses, education, personal care, and other needs not covered by public benefits. By appointing a reliable trustee, clients can ensure that their loved ones are well cared for and that the funds are managed prudently.
Upon the beneficiary's death, the assets remaining in the SNT are not subject to reimbursement claims from state or federal agencies. Since the assets in the SNT never legally belonged to the beneficiary, they are protected from being used to repay benefits received. Instead, these assets can be directed to other beneficiaries designated by the client. This feature allows clients to ensure that their estate is distributed according to their personal wishes, even after the death of the SNT beneficiary.
In summary, Special Needs Trusts offer a vital solution for clients who want to provide for loved ones without jeopardizing their public benefits, as well as ensuring controlled access to inherited funds, and protecting the trust assets from reimbursement claims.
For investors and clients seeking to safeguard their family's financial future, an SNT can be an essential component of their estate planning strategy.
As you consider the financial planning needs of your family, it's crucial to understand the benefits and intricacies of Special Needs Trusts. Consulting with a financial advisor or an estate planning attorney can provide personalized guidance and help you establish an SNT that meets your specific requirements and goals.
With the right planning, you can ensure that your loved ones receive the support they need while preserving access to essential public benefits.
There is a common misconception that estate planning is something that only the affluent need to do before they die. However, estate planning is important for everyone, regardless of income level or net worth. Planning for the disposition of assets upon your death can provide benefits to all the parties involved.
Estate planning provides clarity and peace of mind. By naming heirs in advance and clearly outlining how assets should be distributed, individuals can prevent unnecessary stress, expenses, and even legal battles for their families. Without a plan, these decisions may be left up to the courts.
Beyond designating heirs, the process can also involve strategies to safeguard assets. For example, establishing a trust ensures that wealth passes to the right people, while potentially reducing taxes. Estate planning can also prepare for life events—such as incapacity—through tools like a durable power of attorney, which authorizes someone to handle legal and financial decisions, or a health care proxy, which designates someone to make medical decisions. A living will can further express preferences about life-sustaining medical treatment.
At the foundation of any estate plan is a will or trust. Creating one with the guidance of a qualified attorney helps avoid costly oversights. An experienced professional will ask questions that might otherwise go unconsidered—such as whether minor children could manage an inheritance, or how a divorce or death in the family might affect asset distribution.
Choosing the right people is central to effective estate planning. First is the executor, who will be responsible for carrying out the plan. Then come beneficiaries, who should be carefully designated on insurance policies and retirement accounts such as 401(k)s, IRAs, or pensions. It’s important to note that these beneficiary designations override instructions in a will or trust, meaning that assets pass directly to the named individuals.
While assets transferred to a spouse are not subject to estate taxes, transfers to children or other beneficiaries may, depending on the size of the estate. Federal exclusions apply, but some states impose their own estate taxes as well.
To manage these costs, individuals may use tools such as life insurance policies, trusts, or gifting programs designed to reduce the taxable value of the estate. Since the rules can be complex, professional tax and legal guidance is essential.
No matter the size of your estate, take steps now to ensure your wishes are honored and your loved ones are protected. Estate planning isn’t about how much you have—it’s about leaving behind clarity, care, and peace of mind.
There are several kinds of trusts and wills to help pass down your legacy or care for you in the case you are incapacitated. Many people already have estate documents, probably executed many years ago. With laws constantly changing, and personal circumstances too, an estate planning attorney should review the documents every few years, as they can guide you to the right tools for your unique situation. Here are a few points to consider.
1. Health Care: Powers of attorney for health care and property are part of every complete estate plan. With a health-care power, a chosen agent acts on your behalf if you become unable to make decisions. With durable power for property, the chosen agent acts if you are incapacitated and can’t sign a tax return, make investment decisions, make gifts or handle other financial matters. Additionally, make sure the health-care power addresses the Health Insurance Portability and Accountability Act. This governs what medical information doctors can release to someone other than the patient.
2. Beneficiaries: Are beneficiaries, executors, trustees and guardians named in the wills or trust documents still current? Are all still living? Can someone new fill a role better?
3. Addendums and Schedules: What about any updates needed to addendums or schedules that specify disbursement of personal property? Make sure the schedules are current and attached.
4. Decanting: Are all existing trust documents needed? Some states allow for decanting, which means emptying the contents of an irrevocable trust into another one newly created, if the irrevocable trust becomes unworkable or outdated. Not all states allow decanting.
5. Children: What about children, have they passed the ages specified in a children’s trust (in which money is designated for such specific purposes, like education, for instance)? If that’s the case, then the trust may need to be updated.
6. Special Needs: Another consideration are heirs with disabilities or special needs. Don’t assume typical estate documents automatically help in those situations. Seek out a financial advisor and attorney who specialize in this planning.
7. Financial Accounts & Beneficiaries: Check beneficiary designations on brokerage accounts, insurance policies and retirement accounts. Ensure that all beneficiaries are current. Be sure to understand the firm’s policy when one beneficiary dies before the others. If you want the share of the assets to pass by blood line - to the deceased’s children, for example - you may need to put in language specifying that distribution. Otherwise, the remaining listed beneficiaries may simply divide the assets.
8. Shared Accounts: Sometimes a parent names a child on a bank account so the child can access or use the money if the parent can’t act. Understand that if the child is a joint owner on an account, the money passes to the child no matter what the will dictates.
9. If You've Moved: If you’ve moved to another state since executing the estate documents, then you should find a local estate attorney to check any legal differences for planning between the old and new states.
10. Life Insurance Expiration: Another item to check is life insurance expiration. Consider how long to keep it if it looks like you may outlive it.
These items can help ensure your wishes are carried out if you are incapacitated or once you are gone. Planning is essential and there are professionals that can help guide you through the process.
Market volatility, like we had earlier this year, can understandably spark anxiety among investors. However, seasoned investors and financial professionals recognize these moments as opportunities to strategically manage taxes.
One such strategy is tax-loss harvesting – a tactic designed to reduce your taxable income by selling investments at a loss, offsetting capital gains, and potentially generating tax savings.
Tax-loss harvesting involves selling securities that have declined in value to realize a capital loss, which can then offset capital gains from other investments. If the investor’s losses exceed gains in any given year, it can be used to offset ordinary income, and depending on the amount, it may be carried forward and applied to future tax years.
Market downturns often present prime opportunities for tax-loss harvesting. In volatile markets, stocks or mutual funds may dip below the purchase price. Selling these underperformers allows investors to realize losses that can be strategically used to offset gains realized elsewhere in the portfolio.
An essential consideration in tax-loss harvesting is the IRS’s “wash-sale” rule, which prevents investors from claiming a loss if they purchase the same, or substantially identical security, within 30 days of the sale.
To maintain market exposure while avoiding the wash-sale rule, the recommendation is to buy a different, yet similar, security to replace the one sold.
Tax-loss harvesting isn't just a year-end strategy; it can be integrated throughout the year, particularly during volatile periods. Collaborate with your financial advisor to regularly monitor your portfolio for opportunities. By methodically employing tax-loss harvesting, investors can enhance after-tax returns and achieve greater financial efficiency. Financial professionals can provide critical guidance in navigating complex financial landscapes, helping investors make informed decisions that support long-term goals. By identifying opportunities such as tax-loss harvesting and timing them effectively, investors can strengthen overall portfolio performance, turning market downturns into strategic advantages.