TAX PLANNING Archives - Page 2 of 3 - Centura Wealth Advisory

wealth advisors discuss Pass through Entities

Ep. 70: Everything You Need to Know about Pass-Through Entities

Pass-through entities are a popular business structure for small business owners that allow profits and losses to pass through to the owners’ personal tax returns instead of being taxed at the corporate level.

In Episode 70 of the Live Life Liberated podcast, Chuck Levun, a tax and business attorney with Levun, Goodman and Cohen, shares his expertise on pass-through entities with host Kyle Malmstrom. The podcast covers a range of topics related to pass-through entities, including S corps, LLCs, partnerships, and more. Chuck offers insights into the advantages and disadvantages of each structure and how to choose the right one for your business.

This blog highlights the limitations and drawbacks of S corporations compared to partnerships and LLCs, as discussed by Chuck and Kyle in the podcast, and emphasizes the importance of tax planning for small business owners. Whether you’re just starting out or have been running a successful business for years, there’s always more to learn about how to minimize your tax liability and maximize your profitability.

What Are Pass-Through Entities?

Pass-through entities are designed to “pass through” income, deductions, and tax liabilities to individual owners or partners. Unlike traditional corporations, which are subject to corporate-level taxes, pass-through entities avoid double taxation, simplifying the tax process and often reducing overall tax burdens.

Types of Pass-Through Entities

S Corporations (S Corps): Offer limited liability protection and avoid corporate taxation but come with strict ownership and operational rules.
Limited Liability Companies (LLCs): Combine liability protection with operational flexibility.
Partnerships: Provide flexibility in ownership, management, and tax deductions.

Each structure has its own strengths and limitations, making it critical for business owners to evaluate their unique needs before making a choice.

Comparing Pass-Through Entity Types

S Corporations

S corporations combine limited liability protection with the tax benefits of a pass-through structure. Shareholders report profits and losses on their personal tax returns, avoiding corporate taxes. However, S corporations come with notable limitations:

Ownership Restrictions: S corporations can only have up to 100 shareholders, and shareholders must be U.S. citizens, resident aliens, or certain types of trusts.
Loss Deductions: Loss deductions are limited to the shareholder’s basis, which excludes debt. This restriction can limit the ability to offset losses.
Compliance Requirements: S corporations face stricter rules regarding ownership structure and operational practices.

Partnerships and LLCs

Partnerships and LLCs offer significantly more flexibility in terms of ownership, management, and tax treatment. Key advantages include:

Broad Ownership: These entities allow for a wider range of investors, including individuals, corporations, and foreign entities.
Debt in Basis: Debt is included in the owner’s basis, allowing for greater loss deductions and more flexible debt management.
Adaptable Structure: Partnerships and LLCs are less restricted by regulations, making them ideal for businesses that need to pivot or grow quickly.

For businesses involved in real estate, partnerships and LLCs often provide smoother refinancing options and greater ease in managing cash flow without triggering additional tax liabilities.

Key Considerations for Business Owners

When choosing a pass-through entity, it’s important to consider several factors:

Ownership Flexibility: Partnerships and LLCs allow diverse ownership structures, making it easier to bring in capital or new partners.
Loss Deduction and Debt Management: Partnerships and LLCs provide better options for deducting losses and managing debt compared to S corporations.
Regulatory Simplicity: Partnerships and LLCs are less regulated than S corporations, offering more adaptable frameworks for businesses needing to pivot or scale.

Benefits of Tax Planning and Choosing the Right Entity

Careful tax planning is critical when selecting the right business structure. By evaluating the advantages and disadvantages of each entity type, business owners can minimize their tax liability and maximize profitability. For instance, partnerships and LLCs often allow for more strategic use of debt and losses, while S corporations may provide simplicity for smaller businesses with limited ownership needs.

Avoiding Common Mistakes with Pass-Through Entities

Mistakes in entity selection can lead to unnecessary tax burdens, compliance challenges, or operational inefficiencies. To avoid these pitfalls:

Understand Ownership Rules: If your business plans to bring in outside investors, partnerships or LLCs may be a better fit than S corporations.
Factor in Real Estate Holdings: For businesses holding real estate, partnerships and LLCs are typically more advantageous due to their treatment of debt and refinancing.
Plan for Future Growth: Choose a structure that aligns with your long-term goals, whether that means raising capital, expanding operations, or managing tax obligations effectively.

Why Professional Guidance Matters

The intricacies of pass-through entities require careful consideration, particularly for businesses with complex operations or growth plans. Working with a tax professional or business consultant ensures you fully understand the implications of your chosen structure and can plan effectively for the future. Their expertise can also help you navigate ever-changing tax laws and regulations.

Connect With Centura

At Centura Wealth Advisory, we go beyond a traditional multi-family office wealth management firm to offer advanced tax and estate planning solutions which traditional wealth managers often lack in expertise, knowledge, or resources to offer their clients.

We invest heavily into technology and systems to provide our clients with fully transparent reporting and tools to make informed decisions around their wealth plan.

Read on to learn more about our 5-Step Liberated Wealth Process and how Centura can help you liberate your wealth.

Disclosures

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

February 22, 2023

Business team meeting to conference, collaboration discussing working analyzing with financial data and marketing business strategy project, presentation and brainstorming to making profit of company

NEWS, TAX PLANNING

The SECURE 2.0 Act: What These Changes Mean for Taxpayers

Author: Seth Meisler, CFA, CFP^®, CPA/PFS, MBA, Sr. Wealth Advisor

On December 23, 2022, we received a gift from Congress. A 4,000 page bill called the Consolidated Appropriations Act of 2023. Inside this bill is what is now being called the “SECURE 2.0 Act” (SECURE 2.0). In 2019, the SECURE Act, also known as the Setting Every Community Up for Retirement Enhancement, made significant changes to IRAs and retirement plans.

The largest changes affect those who inherited IRAs or retirement plans. SECURE 2.0 Act offers a number of changes to the existing retirement system, but not as radical as its predecessor. The provisions included in this act, such as raising the age for RMDs and modifying catch-up contribution limits, may appear to be positive at first glance. However, it is important to consider the long-term implications and potential drawbacks of these changes.

In this blog, we will examine the key provisions of the SECURE 2.0 Act and shed light on what these changes could mean for you and your retirement plan.

Significant Changes For Retirement Accounts

Increased Age for Required Minimum Distributions (RMDs)

As of January 1, 2023, the age at which you must begin withdrawing money from your retirement accounts (RMDs) has increased to 73, up from 72. However, if you turned 72 in 2022 or earlier, you will still need to take the RMDs as previously required. In 2033, the RMD age will move to 75.

This may sound like a positive change, but withdrawing money later may not be the most tax efficient option. Due to a combination of rising account values and potential for rising tax rates, taxpayers who delay taking distributions from tax deferred accounts could be subject to pay higher rates in the future than today. It may be more advantageous for individuals to withdraw funds from their IRAs earlier or convert them to Roth accounts, rather than letting these accounts accumulate and potentially facing a substantial tax bill in the future. Careful consideration and planning with your financial advisor will be essential to prevent potentially overpaying taxes and to take advantage of available tax savings opportunities.

Penalty Tax Reduction

The penalties for not taking RMDs will also decrease. Previously, if you failed to take an RMD, you were subject to a 50% penalty on the missed amount. Starting in 2023, the penalty will be reduced to 25% of the missed RMD amount. If you rectify the missed RMD by taking it and filing a corrected tax return promptly, the penalty for IRA accounts will be further reduced to 10%.

Roth Plan Account RMD Elimination

Currently, Roth IRAs are exempt from lifetime RMDs, but Roth Plan accounts (401(k), 403(b), 457(b), etc.) are not. SECURE 2.0 eliminates the RMDs from Roth plan accounts starting in 2024.

Higher Catch-up Contributions

Starting in 2025, SECURE 2.0 increases the catch-up limit for individuals ages 60, 61, 62, or 63 to the greater of $10,000 or 150% of the regular catch-up contribution amount for 2024, adjusted for inflation.

Starting in 2025, Simple IRA participants ages 60, 61, 62, and 63 can also make larger catch up contributions. The catch up amount is the greater of $5,000 or 150% of the regular catch-up contribution amount for 2025, adjusted for inflation.

Currently, catch-up contributions (401(k), 403(b), governmental 457(b), but not SIMPLE IRAs) for those over 50 can be made on either a pre-tax or Roth basis. Starting in 2024, SECURE 2.0 mandates plan participants with earnings over $145,000 (subject to inflation) to make a catch-up contribution to a Roth plan account (if offered by the plan).

Note: If a plan doesn’t offer a Roth option, catch-up contributions are not permitted for any employee (regardless of their wage level).

Starting in 2024, the catch-up contribution limit for IRAs for those aged 50 or older will be adjusted for inflation, meaning it may increase annually based on cost-of-living adjustments. For 2023, the catch up contribution is still $1,000, although the IRA contribution limit has increased to $6,500.

Roth Changes

SIMPLE and SEP IRA Roth Options

Previously, contributions to SIMPLE and SEP IRA had to be made on a pre-tax basis. However, SECURE 2.0 permits the creation of SIMPLE and SEP Roth IRA in 2023. This includes contributions in the employee’s taxable income for the contribution year. It is possible to create a Roth SEP or SIMPLE today, but it will take time for IRA custodians and employers to update their systems, programs, paperwork, and processes to support such contributions.

Employer Contributions as Roth Contributions

SECURE 2.0 permits employer contributions (match or non-elective, but not Profit Sharing) to be allocated towards Roth contributions in a qualified plan, 401(k), 403(b), or governmental 457(b) plan, starting from its implementation. It’s important to note that these amounts must be fully vested and will be included in the employee’s taxable income for the contribution year.

529 Plan to Roth IRA Rollover

Starting in 2024, SECURE 2.0 allows for tax and penalty-free transfer of 529 plan funds to a Roth IRA. However, several conditions must be met to be eligible:

The Roth IRA must be in the name of the 529 plan beneficiary;
The 529 plan must have been in existence for at least 15 years;
The annual transfer limit is the Roth IRA contribution limit for that year ($6,500 in 2023);
The lifetime rollover limit is $35,000;
And contributions to a 529 made within the preceding 5 years (and associated income) cannot be rolled over to a Roth IRA.

In many respects, this is a great idea that is impractical and is likely to be rarely used, based on the current restrictions.

Qualified Charitable Distributions (QCD)

Inflation-indexed QCD Limit

The annual limit for QCD was set at $100,000 when it was first introduced in 2006 as part of the Pension Protection Act. Despite the passage of time, the limit has remained unchanged. However, starting in 2024, the QCD limit will be adjusted for inflation.

Ability to Use QCD for Split-interest Entities

Effective in 2023, individuals can make a one-time QCD of $50,000 to a charitable gift annuity, charitable remainder unitrust, or charitable remainder annuity trust.

Final Thoughts

These are just a few of the many rules that have changed with the introduction of SECURE 2.0 Act. It’s important to note that some changes, although they appear beneficial, may not have the desired outcome depending on your personal financial situation.

These recent rule changes highlight the importance of staying informed and having a comprehensive plan in place. It’s crucial to consider the long-term implications of these changes and how they may impact your finances. It’s advisable to work with a financial advisor to navigate these changes and ensure you’re making the best decisions for your future.

Connect With Centura

At Centura Wealth Advisory, we go beyond a traditional multi-family office wealth management firm to offer advanced tax and estate planning solutions which traditional wealth managers often lack in expertise, knowledge, or resources to offer their clients.

We invest heavily into technology and systems to provide our clients with fully transparent reporting and tools to make informed decisions around their wealth plan.

Read on to learn more about our 5-Step Liberated Wealth Process and how Centura can help you liberate your wealth.

Disclosures

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

February 6, 2023

close up group of businessman use stylus pen for explaining dashboard about company's profit monthly on tablet and businesswoman holding report paper for collaborate work at meeting event , business finance concept

ESTATE PLANNING, LIBERATED WEALTH, NEWS, TAX PLANNING

5 Steps to Support Sophisticated Wealth Management

Sophisticated wealth management is a term used to describe financial planning and investment strategies that are tailored to the unique needs and objectives of high net worth individuals. This type of wealth management typically involves a holistic approach that considers the client’s entire financial picture, including their investments, taxes, estate planning, and other financial matters.

A wealth advisor typically creates a specially tailored investment strategy and plan for their clients to help them manage their assets. This considered, advisors are constantly searching for the ways to streamline and support sophisticated wealth management. At Centura Wealth Advisory, we believe in five steps to support these goals.

Before we discuss, let’s review what wealth management is.

What Is Wealth Management?

In simple terms, wealth management is a service intended to help wealthy individuals meet a diverse set of needs and financial goals. This service is conducted through a consultative process in which an advisor begins by uncovering a client’s unique facts, assumptions and goals. This information then allows advisors to begin crafting a plan that is specific to each client and their situation. Once clients have evaluated options, and made decisions, maintaining a plan and keeping it on track is how advisors steward clients’ wealth over their lifetime (and beyond).

At Centura, the wealth management process includes:

Uncover – Meticulous discovery process to identify facts, assumptions & goals
Unlock – Analyzing & Triangulating to unlock issues and opportunities
Design – Developing a multi-purpose action plan to chart new pathways
Liberate – Implement planning & portfolio solutions
Steward – Maintaining plan by monitoring and recalibrating as appropriate

This process allows advisors to define the scope of work and related value that can be provided to clients. Some of that value may be financial gain and other value may be found in more qualitative aspects such as peace of mind and fulfillment of life goals.

Why Are Some Clients Underserved in Wealth Management?

Some clients may notice a gap in comprehensive planning and the service they actually receive.

Financial professionals typically focus on a few key goals for wealthy families and individuals: growing wealth, retaining wealth, transferring wealth, and strategic giving.

While all of these goals are important, perhaps the most significant challenge in wealth management is tax planning. Why? Once a client accumulates a certain level of wealth, depletion by taxation becomes a major concern.

However, this phenomenon – and the overall focus on retaining wealth instead of simply building it – is often overlooked by financial advisors.

That’s why we do things differently at Centura. Let’s take a look at how we close this gap in service.

How do We Close this Gap in Wealth Management Services?

At Centura, we employ several strategies to close this gap:

We take a holistic planning approach
We utilize five steps to liberate wealth in a collaborative process

What Does a Holistic Financial Plan Include?

A holistic approach looks at an individual’s lifestyle, goals, values, and priorities to create a financial plan that works for them. Financial planners can coordinate these needs and the lifestyle of their clients in order to create a strategy.

A holistic financial plan may include:

Investments (portfolio, brokerage accounts, ETFs, mutual funds, etc.)
Retirement planning (finances and lifestyle, cashflow & liquidity)
Wealth Transfer planning (Estate Tax, Gift Tax, Generation Skipping Tax)
College planning
Budgeting and saving
Tax allocation (Taxable, Tax Deferred, Tax Free)
Risk Management Needs including insurance and asset protection
Income tax planning (forward looking)
Tax preparation & compliance (rear looking)

5 Steps to Support Sophisticated Wealth Management

As noted earlier, at Centura we have created a comprehensive process that’s specifically designed for ultra-high-net-worth families who have complex financial needs. Our process helps us uncover and solve big and small challenges. Sometimes these are common issues and opportunities for wealthy families, and sometimes they are unique. Our process does not discriminate between uniqueness versus common and therefore is well-adjusted to serve our audience.

Just as important is our passion for finding and solving complex problems. We flourish in the details and how to find creative, innovative and effective ways to find efficiencies that extend and expand your wealth horizon.

1. Uncover

First, we pursue holistic discovery by gathering and understanding data; the client’s purpose, path, and professional roster. Categorically this allows us to identify relevant facts, assumptions and goals.

2. Unlock

The next phase is to analyze the facts, assumptions and goals to identify issues and opportunities which is done by establishing a baseline plan. We then consider “what if scenarios, and identify a planning scope that can address the unique needs & wants of the client.

3. Design

The design element is a core piece of the Liberated Wealth® process. The design element includes a multi-phase action plan which drives innovative solutions across a span of professionals. At Centura, we serve as the plan architect and coordinate amongst required professionals. As part of this phase, a wealth scorecard is developed and a forward looking approach to the client’s situation is employed.

4. Liberate

This step involves understanding purposeful deployment. This includes implementation and advancement with plan implementation, coordination of professionals, portfolio implementation, and scorecard reporting.

5. Steward

The final step of the Liberated Wealth® process is to monitor and pivot through purposeful deployment. This includes plan monitoring, timely recalibration, and pivoting based on life events.

This is a detailed explanation of what a process can look like for a client. It’s important to understand what the short and long-term goals are for your wealth management and understanding your advisor’s process is the first step to achieving that goal.

All of these steps revolve around the importance of predicting and planning for the future.

Connect With Centura

At Centura Wealth Advisory, we go beyond a traditional multi-family office wealth management firm to offer advanced tax and estate planning solutions which traditional wealth managers often lack in expertise, knowledge, or resources to offer their clients.

We invest heavily into technology and systems to provide our clients with fully transparent reporting and tools to make informed decisions around their wealth plan.

Read on to learn more about our 5-Step Liberated Wealth Process and how Centura can help you liberate your wealth.

Disclosures

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

December 7, 2022

Business Finance, accounting, contract, advisor investment consulting marketing plan for the company with using tablet and computer technology in analysis.

CHARITABLE GIVING, INVESTING, NEWS, TAX PLANNING

Tax Deductible Donations: Rules of Giving to Charity

Donating to charity carries many benefits for taxpayers, such as allowing people to connect with a personal cause and preserve legacy–and it doesn’t hurt that donating to charity can lower your tax bill.

If donating to a charity is part of your tax plan, here are a couple of tips so you can maximize your tax-deductible donation before year-end.

What Qualifies as a Tax Deductible Donation?

Tax deductible donations are contributions of money or goods to a tax-exempt organization such as a charity. The IRS states “Contributions must be made to qualified organizations to be deductible.”

However, donations do not have to be money. In fact, the following donations are eligible for deductions:

Cars
Clothing
Stocks or mutual funds, at the fair market value
Collections of valuable items
Artwork
Jewelry
Securities
Real estate

If the value of what you donate exceeds $250, you need to obtain and file a written acknowledgement from the qualified organization you donated to.

If the value of your non-cash charitable contributions is $500 or more, you’ll need to include specific information about the charitable organization and what was donated when you file your tax return.

What Does Not Qualify as a Tax Deductible Donation?

Taxpayers can maximize potential tax savings by knowing what they can and cannot claim. Let’s take a look at some situations that do not qualify as a deductible donation.

Gifts to a Non-qualified Charity or Nonprofit

Many taxpayers assume that any charity or nonprofit organization is qualified. However, this is not always the case. Each group must register with the IRS for the section of the law that applies to it. According to TurboTax:

Religious and charitable organizations typically fall under section 501(c)(3) and can receive tax-deductible donations.
Not every section allows these deductions. For instance, social welfare and civic organizations registered under section 501(c)(4) don’t qualify.
However, two types of 501(c)(4) organizations—veterans’ organizations with 90% war vet membership and volunteer fire departments—do qualify for charitable deductions.

If you are unsure whether an organization qualifies, try this IRS search tool. We still recommend asking the organization about their qualifications before making a contribution.

A Promise or Pledge to Pay

Pledges can’t be dedicated until the money is actually paid.

For instance, if you agree to donate $50 a month for a year to a qualified charity, you can only claim the donations you made within the tax year, not the whole $600.

A Gift That’s Not a Gift

Many organizations use different methods to earn money. However, fundraising tickets are not deductible. For example, bingo games, raffle tickets or lottery-based drawings are not deductible contributions.

Some Community Drives

Another common misconception relates to community drives aimed at helping an individual or family with issues such as: medical costs, loss of a house from fire or funeral expenses.

Make sure that the cause is sponsored by a 501(c)(3) organization such as the Salvation Army or Red Cross so your financial assistance is deductible.

Political Organizations

The IRS is very clear that money contributed to a politician or political party can’t be deducted from your taxes.

How Much Do You Need to Donate to a Charity to Get a Tax Deduction?

There is no minimum donation amount necessary to earn a tax dedication. In fact, even if you do not itemize your deductions, qualified cash donations up to $300 can be deducted (or $600 if you are filing married jointly). Why? The IRS wants to encourage taxpayers to give money to charity.

However, the safe choice is to always itemize your donations. We recommend getting a receipt for any donations to avoid the danger of having them disallowed in case of an audit.

Is There a Limit on Charitable Donations? How Much does the IRS Allow for Charitable Donations?

Typically, the IRS limits donations to either 50 percent of adjusted gross income for public charities or 30 percent of adjusted gross income for private foundations. Let’s take a look at each of these in more detail.

Public Charities

Contributions to charitable organizations may be deducted up to 50 percent of adjusted gross income computed without regard to net operating loss carrybacks.

According to the IRS, the 50 percent limitation applies to

“All public charities (code PC)
“All private operating foundations (code POF)
“Certain private foundations that distribute the contributions they receive to public charities and private operating foundations within 2-1/2 months following the year of receipt, and
“Certain private foundations the contributions to which are pooled in a common fund and the income and corpus of which are paid to public charities.”

Private Foundations

The IRS states “Contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are limited to 30 percent adjusted gross income (computed without regard to net operating loss carrybacks), however. Tax Exempt Organization Search uses deductibility status codes to indicate these limitations.”

We recommend that taxpayers enlist the assistance of a tax professional or financial advisor before making large contributions to ensure the donations are deductible.

*Contributions must actually be paid in cash or other property before the close of your tax year to be deductible, whether you use the cash or accrual method.

What is a Charitable Lead Annuity Trust (CLAT)?

A charitable lead annuity trust (CLAT) is a charitable trust in which a charity, donor-advised fund, or a foundation that the grantor selects, receives annual payments. These payments may be set for a term of years or the grantor’s lifetime.

At the end of this period, the remaining CLAT assets are distributed amongst the trust’s non-charitable beneficiaries. These beneficiaries are typically the grantor’s descendants or trusts for the descendants’ benefit.

Charitable lead annuity trusts provide a tax efficient way for individuals to transfer wealth to heirs while benefiting charities.

However, CLATs are not exempt from income tax. If the grantor wants to claim the immediate income tax charitable deduction, the CLAT must be set up as a grantor trust, or G-CLAT.

How to Make the Most of Your Charitable Donations

At Centura Wealth Advisory, we know how to optimize charitable giving strategies to best benefit your long-term financial goals.

Read on to learn more about our 5-Step Liberated Wealth Process and how Centura can help you liberate your wealth.

Read on to learn more about sophisticated gifting strategies for affluent individuals.

Disclosures

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

November 2, 2022

Business Signing a Contract Buy - sell house.

EXIT PLANNING, NEWS, TAX PLANNING

Selling Your Business: Navigating Taxes and What to do Next

During the process of selling a business, owners have many obstacles to navigate: processes, taxes, and, of course, deciding what to do next.

In this article, we’ll discuss the different types of taxes a business owner may encounter when selling their business, as well as options for how to invest the proceeds.

How to Navigate Taxes While Selling Your Business

In the process of selling a business, taxes tend to be one of the most significant aspects to consider.

The IRS separates taxable income into two main categories: “ordinary income” and “realized capital gain.”

Capital Gains Tax: What is it and How Does it Work?

In simple terms, a capital gain is a profit gained from an investment. When you sell a business, the capital gain is the difference between the original cost and the sale price.

Taxes on capital gains taxes come into play when you sell the business because capital assets are being sold. Capital gains tax is charged on all capital gains. A net long-term capital gain is usually no higher than 15% for most taxpayers, though there are some exceptions for high earners.

What is Ordinary Income?

Ordinary income includes earned wages, rental income, and interest income on loans, CDs, and bonds (except for municipal bonds). For tax purposes, short-term capital gains are treated as ordinary income on assets held for one year or less.

How does this relate to selling your business? Gains on some of the assets being transferred may have to be taxed at ordinary income tax rates rather than at the 15 percent maximum long-term capital gains tax rate.

Let’s Talk Depreciation Recapture

Depreciation recapture is “the gain realized by the sale of depreciable capital property that must be reported as ordinary income for tax purposes. Depreciation recapture is assessed when the sale price of an asset exceeds the tax basis or adjusted cost basis. The difference between these figures is thus “recaptured” by reporting it as ordinary income.”

What does this mean for business owners? The IRS can collect taxes on any profitable sale of an asset that the taxpayer had used to previously offset taxable income.

What to do After Selling Your Business

Business owners may not be sure where to start when it comes to investing the proceeds of the sale of their company. During this time, business owners may want to utilize the help of professional advisors – such as our team as Centura Wealth Advisory – to take a fresh approach curated to the current conditions of the market as well as the goals of the client.

Let’s review some investment options business owners can consider after selling their business.

Structured Notes

A structured note is “a debt obligation that also contains an embedded derivative component that adjusts the security’s risk-return profile. The return performance of a structured note will track both the underlying debt obligation and the derivative embedded within it.”

Structured notes, written by high credited banks, are customizable and well-suited for a rising interest rate environment and can help investors maintain returns. Due to these benefits, more individuals and families are investing using structured notes.

Listen to an Example: Our Client, Doug Pate

In Episode 62 of the Live Life Liberated podcast, Kyle Malmstrom interviews Doug Pate, a client of Centura Wealth Advisory (Centura), who recently sold his business, International Surf Ventures Inc., after growing it for 17 years.

Doug Pate co-founded ISLE with his best friend, Marc Miller. Doug and Marc share a lifelong passion for the ocean and the sports that surround it. In their first four years of business, they sold surfboards online. At the time, there was no direct-to-consumer surfboard company, and by default, they became the industry’s pioneers. In 2008, they shifted their focus from surfboards to stand-up paddle boards as a way to help more people get on the water across the country.

In this podcast, Doug discusses:

His personal experience of navigating a business exit
How the team at Centura guides him through investing using structured notes
How CLATs helped him save seven figures in taxes and achieve his charitable goals
Why wealth protection is as important as growing your wealth
Centura’s involvement in his wealth management (including alternative investments)
And more

Selling Your Business?

Centura Wealth can help you navigate the process with ease. Learn how to prepare to sell your business here.

Disclosures

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

October 21, 2022

Asia stock trader agent or Sale tax loan broker advice brief and point hand to graph report talk to client at office desk show budget chart data or legal result on claim form. Trust will in work plan.

CHARITABLE GIVING, ESTATE PLANNING, NEWS, TAX PLANNING

Sophisticated Charitable Giving Strategies for Affluent Individuals

Affluent individuals and families may choose to implement charitable giving strategies for the wealth of benefits these strategies provide.

These benefits allow a family to connect with a personal cause or preserve their legacy while contributing to an efficient wealth strategy.

Charitable giving strategies can help affluent families and individuals to realize financial benefits as well as reduce current and estate taxes. These charitable giving strategies can include:

Charitable lead annuity trusts (CLATs)
Grantor-charitable annuity trusts, and
Qualified charitable distributions

Let’s discuss each of these strategies and their benefits in detail.

Make a Qualified Charitable Distribution (QCD)

According to Investopedia, a qualified charitable distribution “allows owners of a traditional IRA to exclude RMDs from their adjusted gross income (AGI) if they give the money to approved charities, also known as qualified charitable organizations.”

In simpler terms, the QCD guideline allows individuals to deduct the amount they donate from their IRA. The QCD counts as part of their annual RMD amount, and they must pay the distribution directly from their IRA to the qualified charity.

*Distributions must be made directly to an approved charity and are capped at $100,000 annually per person. Please enlist the assistance of a qualified financial or tax advisor to best navigate the process of making a qualified charitable distribution and earn the associated tax benefits.

Benefits of Making a Qualified Charitable Distribution

This charitable giving strategy can effectively reduce an affluent individual’s adjusted gross income while satisfying their required minimum distribution set by the IRS. Further, this strategy can help offset other taxes, such as social security.

Utilize Charitable Lead Annuity Trusts (CLATs)

A charitable lead annuity trust (CLAT) is a charitable trust in which a charity, donor-advised fund, or a foundation that the grantor selects, receives annual payments. These payments may be set for a term of years or the grantor’s lifetime.

At the end of this period, the remaining CLAT assets are distributed amongst the trust’s non-charitable beneficiaries. These beneficiaries are typically the grantor’s descendants or trusts for the descendants’ benefit.

Benefits of Charitable Lead Annuity Trusts (CLATs)

Charitable lead annuity trusts provide a gift tax efficient way for individuals to transfer wealth to heirs while benefiting charities.

However, CLATs are not exempt from income tax. If the grantor wants to claim the immediate income tax charitable deduction, the CLAT must be set up as a grantor trust, or G-CLAT.

Grantor Charitable Lead Annuity Trusts

In a grantor charitable lead annuity trust (G-CLAT), the trust corpus remaining at the end of the term is given back to the donor instead of the donor’s descendants.

G-CLATs provide a host of advantages, which will improve income tax planning, wealth transfer planning, and charitable planning. Let’s take a look at the benefits of this sophisticated charitable giving strategy.

Income Tax Planning

Individuals participating in the G-CLAT will experience the benefits of both immediate and long-term tax benefits once they’ve successfully implemented this charitable giving strategy.

This will result in an immediate income tax dedication for the individual, which is:

Subject to 20 to 30% of adjusted gross income (AGI) limitation
Able to be utilized over six tax years
Ideally consumed at the highest marginal income tax rates

Wealth Transfer Planning

In addition to the immediate benefits of G-CLATs, these trusts also include wealth transfer tax savings. Through these savings, the taxpayer can experience the benefits of a G-CLAT for years.

Charitable Planning

While the taxpayer does not need to have donative intent, charitable planning benefits G-CLATs if the taxpayer decides to participate.

For instance, as a future benefit, G-CLATs provide satisfying charitable annuity payments with appreciated assets, avoiding recognition of gain on these distributions to 501(c)3s.

How to Get Started With These Charitable Giving Strategies

At Centura Wealth Advisory, we know how to optimize charitable giving strategies to best benefit your long-term financial goals. Our team has successfully implemented over 280 CLAT transactions alone.

Read on to learn more about our 5-Step Liberated Wealth Process and how Centura can help you liberate your wealth.

Disclosures

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

October 2, 2022

INVESTING, NEWS, TAX PLANNING

How to Plan and Invest in a Rising Interest Rate Environment

At Centura, we are dedicated to our role as stewards in leading our clients to purposeful financial planning and investing strategies to ensure their success. One of our goals is to help our clients navigate and understand challenging economic changes, such as the current rising interest rate environment.

Listen to our podcast, Live Life Liberated, for a detailed discussion from Sean Clark and David Cariani as they outline financial planning and investment strategies to help you cope with rising interest rates.

What is a Rising Interest Rate Environment?

In 1981, interest rates peaked at about 16%. For the next forty years, interest rates trended downward steadily and reached a low during the COVID-19 pandemic at about .05%. Rates currently stand at a little over 2.5%.

The rising interest rates cause the borrowing costs for both individuals and businesses to increase. This rise will result in a slowdown in economic activity because businesses will be less inclined to borrow money unless they are certain they will be able to earn more money than they paid to borrow.

This rise in interest rates will lead to what Sean and David call a “dampening in economic activity, both on a micro and macro level as the cost of capital increases.”

Who Does a Rising Interest Rate Environment Affect?

From a planning perspective, a rising interest rate environment affects anyone who is considering estate planning for estates that are at, near or above the estate tax exemption threshold or those who earn a high income.

From an investing perspective, the rising interest rates affect investors who own assets and/or traditional fixed-income investments like bonds.

How Does the Rising Interest Rate Environment Affect Planning?

In financial planning, interest rates are used to determine the economics of different strategies. Rising interest rates will have implications on a wide range of strategies and will cause the hurdle rates on those strategies to increase.

As a result, financial planners may need to pivot to new solutions that will be better suited for a high-interest rate environment.

How Does the Rising Interest Rate Environment Affect Investments?

The primary risks of a rising interest rate environment include the potential for a loss in principal value as well as a loss of buying power.

For example, in the current inflationary environment, if an investor’s earnings are 2.5% and prices are increasing significantly–approximately 6-7%–the investor will have 4.5% less buying power at the end of the year than they did at the beginning.

Additionally, short-term bonds are less sensitive to the increased rates of a high-interest rate environment than longer-maturity bonds. Longer-maturity bonds may lock in rising rates for longer-time periods whereas shorter-term bonds require a shorter commitment to the high rates and will allow investors to move on to better opportunities.

Alternative Investments to Consider Over Traditional Fixed Income

Private Credit

Investors may enter private credit investments because of their floating rate loans, which will limit the interest rate risk associated with other forms of investment, such as traditional fixed-income investments.

Life Insurance

Life insurance can be a powerful vehicle for alternative investments. It provides downside protection, high liquidity, and an attractive upside potential relative to investments with a similar risk profile.

Check out episode 31 of our podcast, Live Life Liberated, to learn more about how life insurance solutions can be used as an alternative to fixed-income investments.

Structured Notes

Structured notes, written by high credited banks, are customizable and well-suited for a rising interest rate environment and can help investors maintain returns. For more detail, listen in to Episode 35 of Live Life Liberated, “Structured Notes Simplified with Robert Sowinski.”

Real Estate

Real estate can appreciate with inflation on a long-term basis and prove to be a tax-efficient investment. According to Forbes, “real estate investments have the characteristic of performing well in a rising rate environment. In particular, income-generating real property and multifamily have historically…shown a greater ability to grow net income during expansionary periods than securities and other assets.”

Listen in to learn more about the rising interest rate environment and how it affects financial planning and investing, or check out our blog for more information, such as how Centura can help you liberate your wealth.

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

June 12, 2022

NEWS, TAX PLANNING

What is the Relationship Between an Accountant and a Financial Advisor?

As you look to achieve your financial goals, you may be considering working with a financial advisor or an accountant. Depending on your financial needs and goals, you may need both. So, what is the difference between the two, and when do you need to enlist the help of each?

Let’s discuss.

Financial Advisor vs. Accountant

Let’s identify the differences between a financial advisor and an accountant.

Accountant

An accountant plays a role in recording, summarizing, analyzing, and creating reports of financial transactions. These professionals are licensed to provide tax advice and counsel you on preparing tax returns and estate tax returns.

Moreover, accountants play a large role in suggesting tax-saving strategies. While accountants help strategize and suggest these strategies, you likely need a financial advisor to help implement these strategies.

Financial Advisor

On the other hand, financial advisors are licensed to give investment advice and develop a plan to grow your wealth. Their role as financial advisors is to construct an effective portfolio for your financial goals and risk profile. This typically includes:

Retirement planning
Estate planning
Philanthropic strategy implementation

Which Financial Professional Do You Need For Your Goals?

Your relationship with each professional depends largely on your financial needs and goals. So, when do you need the counsel of either?

Some view their financial advisors as the architects of their wealth management. Financial advisors interact with their clients more frequently to help implement financial plans, monitor their progress, and adjust the sails as necessary.

Alternatively, an accountant steps into this process as a specialist. Their relationship with clients is traditionally more transactional. These professionals help prepare your financial statements and tax returns when needed. Accountants know and understand the IRS rules and regulations in greater depth than a financial advisor.

Clients typically use an accountant when they have a more complex tax situation; whether that means a business owner, a large family, a rental property owner, or someone with multiple streams of income. Taxes can become complicated, which is when partnering with a CPA can move the needle for you.

Clients use financial advisors when they want to develop a savings and investment plan. Your financial advisor is more involved in your everyday financial planning and decision-making. A financial advisor helps steward you through big life events and helps you plan ahead while working to achieve your specific financial goals.

Financial Advisors and CPAs Complement One Another

Deciding between a financial advisor and a CPA is not a one or the other decision. Financial advisors often work together with CPAs to help you achieve your financial goals. CPAs can offer insight into your financial statements that help guide how your financial advisor helps your plan for your future.

Before you talk with your CPA this tax season, read this article describing a few of this year’s updates to tax deductions.

April 22, 2022

Young man arms outstretched by the sea at sunrise enjoying freedom and life, people travel wellbeing concept

LIBERATED WEALTH, NEWS, TAX PLANNING

5 Steps: The Liberated Wealth Process®

If you’ve worked with any of our advisors at Centura Wealth, you have most likely heard us talking about the Liberated Wealth® process.

We believe that it’s our role as stewards to embrace the details of your existing financial situation. This is where the Liberated Wealth® process comes into play.

In the spirit of transparency, we want to provide information to our clients about our processes and findings. Let’s dive deeper into what the 5 steps of the Liberated Wealth® process look like.

Our tax planning generally starts with your existing baseline. After a comprehensive review, we illustrate and synthesize the complexities of your tax profile into sophisticated options. Our goal is to reduce your tax burden and drive meaningful outcomes for you, your family and friends, and charitable organizations.

Since real estate is often one of the major components of a family’s balance sheet, our expertise in real estate planning is frequently at the forefront of our clients’ minds and needs.

Our team functions based on 5 main steps. They are as follows:

1. Uncover

First, we pursue holistic discovery by gathering and understanding data; the client’s purpose, path, and professional roster.

2. Unlock

The next phase is to follow a precise design by analyzing and triangulating existing strategies, establishing a baseline plan, considering “what if” scenarios, and identifying a planning scope.

3. Design

The design element is a core piece of the Liberated Wealth® process. The design element includes a multi-phase action plan, a wealth scorecard, and charting new pathways.

4. Liberate

This step involves understanding purposeful deployment. This includes implementation and advancement with plan implementation, coordination of professionals, portfolio implementation, and scorecard reporting.

5. Steward

The final step of the Liberated Wealth® process is to monitor and pivot through purposeful deployment. This includes plan monitoring, timely recalibration, and life events reset.

This is a detailed explanation of what a process can look like for a client. It’s important to understand what the short and long-term goals are for your wealth management and understanding your advisor’s process is the first step to achieving that goal.

All of these steps revolve around the importance of predicting and planning for the future. Let’s take a closer look into how planning is implemented into the Liberated Wealth® process.

Planning

Planning is a multi-step process that may seem tedious but is essential to progressing your wealth. It’s easy to be financially disorganized, that’s where we step in. Centura Wealth helps you create order and organization, and most importantly — peace of mind.

Planning to liberate your wealth looks different for each family, individual, and institution. At Centura, we offer different areas of planning, including:

Tax Planning

Short Range Tax PlanningLong Range Tax PlanningPermissive Tax Planning Purpose-Driven Tax Planning

Retirement Planning

Wealth Accumulation
Lifetime Income

Portfolio Planning

Portfolio ReviewPortfolio ProposalPortfolio Stress-testingBespoke Alternatives

Estate Planning

Charitable Planning
Multi-generational Planning
Life Insurance Planning

Real Estate Planning

Real Estate Portfolio Analysis 1031/ExchangesRefinancingExit PlanningLike Exchanges (TICs, NNN, DSTs)

Clearly, there are many planning options available to meet your unique needs. Depending on your position and interests, one of our advisors can work with you to narrow down which options deliver the highest value for you.

Precision

Our tax planning starts with your existing baseline. After a comprehensive review, we illustrate and synthesize the complexities of your tax profile into sophisticated options that drive meaningful outcomes to reduce your tax burden for you, your family and friends, and your organizations.

Precision is key, and our team will analyze and triangulate your purposes and want to design a unique liberated wealth plan.

Part of the precision element includes:

Identifying Existing Strategies
Establishing a Baseline Plan
Unlocking “What-If” Scenarios
Identifying Planning Scope

Purpose

The purpose of liberating your wealth will naturally stem from planning your finances with precision. Once Centura designs your personalized Liberated Wealth® Plan, the next step is to implement and advance the plan. This includes coordinating professionals, portfolio implementation, and scorecard reporting.

With any big step, there are going to be adjustments that come up along the way, and we make sure they still align with your purpose. Centura will help you steward your Liberated Wealth® Plan, even if that means pivoting original goals.

There are tangible ways your plan can be stewarded, including:

Plan monitoring
Timely Recalibration
Life Events Reset

Do you know what it means to find your North Star? Read our blog to find out.

Our process does not discriminate between uniqueness and commonalities and therefore is well-adjusted to serve our audience. We place importance on our passion for finding and solving complex problems.

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability, or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

January 22, 2022

Smiling senior couple jogging in the park

NEWS, TAX PLANNING

An Insider’s Guide to Tax Deductions

2022 is here, which means April 15th is not far behind. This considered it’s crucial to begin planning ahead for the tax season.

You have most likely exhausted most of your options as far as tax deductions go, but there may be some you might have missed with the potential tax changes on the horizon.

*It should be acknowledged that the information in this article is subject to change based on what may or may be altered with the proposed tax changes.

Corporate Gifts

Since the holiday season just passed, corporate gifting might have been top of mind for your company.

If you have employees who have birthdays, babies, or anything that requires a gift, corporate gifts can be deducted to a certain extent.

The Internal Revenue Service (IRS) states that “you [may] deduct no more than $25 of the cost of business gifts you give directly or indirectly to each person during your tax year.”

Sole Proprietor Tax Deductions

As far as deductions go, it’s important to be aware that half the cost of your 1040 form can be deducted if you are a sole proprietor (an unincorporated business owned and run by one individual).

As defined by the Social Security Administration, you are considered “self-employed if you operate a trade, business or profession, either by yourself or as a partner.” There are two income tax deductions that can reduce your taxes.

The first is that your net earnings from self-employment are reduced by half the amount of your total Social Security tax.
The second is as mentioned above, where half of your Social Security tax can be deducted from your 1040.

Educational Expenses

If there are any events that you or your company has participated in for educational purposes, those can be written off as well.

For example, if you’re a Digital Marketing agency, and your team attends a conference about the latest social media updates for 2022, the cost of the conference can be deducted.

General Business Expenses

While you likely know that most business expenses can be deducted from your tax return, you may be leaving some unknown deductions out. But what is considered a business expense?

Any cost that is helping a business grow
Any cost that is helping your team improve their performance

For example, if your HR Manager purchased an audiobook on human nature and communication styles, that can be useful for their role in the office – therefore deducted from your tax return.

Office supplies also fall into the business expense category. (As we’re sure you know, that printer ink cost can really add up!) This also includes office supplies like pens, electronics, paper, organizational tools, and more.

Home Office

Since hybrid and remote workforces have become the new normal, assisting your team in creating a home office that breeds productivity can be pricey. The good news is that cost can be considered a write-off for your 2022 tax returns.

In fact, this might even mean deducting a portion of your mortgage or rent as your office space. Of course, this calculation requires the square footage that is actively being used as a home office and applying that to your total rent or mortgage.

Travel Expenses

Your first thought might be, “Of course I can deduct the airfare for business travel,” but don’t forget about all the other expenses that come with travel. You can often deduct:

Food
Wifi fees
Parking
And more

Entertainment and Meals

Networking is a large part of most industries.

Networking usually consists of some form of entertainment or food. Any meals that are shared with prospects and/or current clients can be deducted. Any entertainment (or events) hosted by your company can also be deducted.

Donations

Lastly, charitable contributions are tax-deductible. Be sure to keep your records of charitable contributions in order to utilize the tax benefits of your company’s effort to give back.

At Centura Wealth, we have tools in place to assist our clients in using charitable giving tools to not only improve their bottom-line but, more importantly, to give back to their communities.

As you look towards the next year, it’s important to take a look not only at the upcoming tax season but also at your financial planning as a whole. At Centura, we understand that the intention behind your planning can positively impact your wealth management, read more in our article here about how intention can influence your financial planning.

Centura Wealth does not make any representations as to the accuracy, timeliness, suitability or completeness of any information prepared by any unaffiliated third party, whether linked to or incorporated herein. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

We are neither your attorneys nor your accountants and no portion of this material should be interpreted by you as legal, accounting, or tax advice. We recommend that you seek the advice of a qualified attorney and accountant.

For additional information about Centura, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you engage our firm for advisory services.

January 1, 2022