Contributed by Taylor K. Ranker, II, CEO and Personal CFO, Questmont Virtual Family Office
At Questmont Virtual Family Office, we’ve decided to stick with one of our standard New Year’s Resolutions: to save our friends and clients more in taxes than ever before by discovering and implementing cutting-edge tax strategies.
When evaluating tax strategies, we like to categorize them by who they are intended for (business or personal), as well as their level of savings and complexity. The specific strategies used will depend entirely on the individual circumstances of the payer. Still, there are a few in 2025 that we think are worth raising awareness of, especially available to low-mid market business owners. Since these strategies are plenty but can be complicated, having a team of experts who all communicate with one another is imperative to be sure if any of these strategies apply to your situation. If implemented, they need to be set up and administered correctly.
To start off, imagine paying yourself insurance premiums instead of a major insurance carrier. You get to deduct the premiums as an expense, as you always have, but now you get to enjoy the benefits (and risks) of the major insurance carrier you used to pay. Any premiums you don’t pay in claims can be invested, and tax may be paid only on the income generated by the portfolio. What was just described is called Captive Insurance. Captive Insurance is a self-insurance arrangement where a business establishes its own insurance company to underwrite risks. From a personal wealth perspective, captives can offer significant cash flow benefits and savings by allowing policyholders to retain underwriting profits and investment income on premiums. Captives are particularly well-suited for covering high-deductible policies, niche risks, or insuring risks that are otherwise expensive or unavailable in the commercial market. For example, in one year, if $400,000 of the $500,000 in premiums remains unused for claims and is invested, this approach not only reduces tax liability but also builds a reserve that could provide future liquidity or wealth growth.
Think about the charities you enjoy supporting. Did you know you can get a charitable deduction today for a donation while enjoying income from the donated assets for the rest of your life? This is called a Charitable Remainder Annuity Trust (CRAT), and this is just one of many charitable strategies available. Charitable strategies are powerful tools for achieving both philanthropic and financial goals, offering tax advantages and wealth planning benefits. These strategies typically involve donating assets to a vehicle that provides immediate tax deductions, ongoing income, or legacy benefits for chosen causes. Other popular options include Charitable Lead Trusts (CLTs) and Donor-Advised Funds (DAFs).
For example, with a CRAT, the donor receives an immediate tax deduction based on the present value of the remainder destined for charity. Because it was donated to a CRAT, the donor receives an annual fixed income payment (e.g., 5% or $50,000) for a set term or their lifetime. At passing, the charity inherits the remainder of the assets left in the trust. Charitable strategies not only amplify charitable giving but can also be used to help manage taxable income, reduce capital gains, and plan for intergenerational wealth transfer while supporting meaningful causes.
Lastly, think about how much you will pay in taxes over the remainder of your lifetime. Imagine there is a way to shield your invested wealth from taxes, both in income and capital gains. Once it’s needed, you take loans against the assets instead of withdrawing, paying virtually zero in tax. Anything at your passing is used to pay off your loan; then the rest is paid to your heirs or favorite charity, all outside of your estate. Private Placement Life Insurance (PPLI) is a sophisticated wealth planning tool that combines life insurance benefits with investment advantages, offering high-net-worth individuals tax-efficient growth and asset protection. This is not your grandpa’s life insurance. PPLI allows only high-net-worth policyholders to invest in customized portfolios within a tax-deferred structure, shielding investment gains from taxes until withdrawn or passed to beneficiaries.
For example, an individual contributes $1 million annually to a PPLI policy for four years, totaling $4 million in premiums. These premiums are invested in a diversified portfolio within the policy. The policy’s value could grow significantly over time without being subject to capital gains or income taxes. If the policyholder later withdraws funds during their lifetime, withdrawals are structured as loans against the policy, minimizing tax liability. At death, the remaining policy value, including the tax-free death benefit, is transferred to beneficiaries.
These, along with 64 others in our Tax Matrix, are some of the strategies we will be Stress Testing in 2025 to legally save our friends and clients significantly in taxes. We like to say “don’t be overly patriotic”- what that really means is, don’t pay in taxes any more than you’re required to, and advanced tax planning can help accomplish just that. Contact your team of advanced tax planning experts to see what opportunities are available to save this year.