When making any important, high-value financial decision, it’s imperative you make sure you have control of your money. Here’s a checklist of five axes of control, and a new tool that can help you achieve all five.
1: Where Your Money Came From:
- Where did your money come from?
- In acquiring it, do you incur any unanticipated costs of fees?
When taking control of your money, it’s important to be involved with every aspect of the flow of capital, meaning:
What you do with your money while you have it
Where your money is going
Where your money came from
Moving capital is a tricky business even for financial professionals, and little changes in the status of your money can sometimes mean new tax incursions on your part. When we make new investments, we are often eager for the new opportunity those new investments can bring, but it’s just as important to keep in mind what happens to the property or asset the capital has been removed from. Make sure you or your financial consultant is paying just as much attention to the changes of status in investments you’re devaluing as you are to the investments in which you’re moving your capital.
2: What Your Money is Doing Now:
- What is the status of your money while you control it?
- Is it being put to its best use, or would the most prudent course of action be to simply withhold acting for the moment?
When taking control of your money as well as the flow of your money, it’s important not to disregard what happens to your money when it’s merely in your possession, rather than when it’s coming in or being moved to a new investment again. Capital gains taxes are a cost that can’t be overlooked.
Did you know that, depending on what state you are in as well as a number of other factors, your capital gains taxes could be anywhere from fifteen percent to as much as thirty percent?
Any attempt at taking full control of your money must at least start with addressing the costs associated with capital gains taxes. Make sure you know what expenses apply to your area, as well as other factors like the nature of your business or your transactions.
3. Where Your Money is Going.
This one comes in two forms. First, there’s the short-term form of being aware where your money is headed.
- What do you want to accomplish with this money?
- What do you want it to ultimately do for you?
When you take control of your money, it’s important that you have these goals in mind, and that you have secured the conveyance by which you can accomplish these goals. Be sure that you know the costs such as capital gains taxes mentioned above, associated with your goals for your money and, most importantly, be sure you’re in control of those means so that you can make the most effective decisions for securing your money and accomplishing your goals.
The second part of this point is what happens to your money long term.
- What do you want to accomplish with your money over the course of your lifetime?
Having control over your money doesn’t mean just being able to make what investments you think are most desirable today, it also means being able to dictate where your money goes for life. This means considering how your money might be portioned out in an inheritance, and what tools you can use to assure its safety for the wellbeing of your children and loved ones.
In the first part of this two-part article, we covered the first three axes that you need to consider when taking control of your money. Be sure to read the second part of this article, available [here] where we’ll not only discuss the last two axes, which are the form of your money and the costs of your money, but also one financial tool that can help you combine all five axes--a Deferred Sales Trust.
5 Ways to Take Control of Your Money: The Axis of Control You Should Have Over Your Money, and One Tool to Get Them All (Part Two)
Be sure you read the first part of this two-part article series on the axis of control you need to take control of your money, available [here]. In this second part, we’ll discuss the last two axes, and Deferred Sales Trusts, a tool that will help you combine them all.
4: What Form Is Your money In:
- Is your money liquid?
- How much of it is principle?
- If your money is invested is it in cash, property, or a stake of a business?
When taking control of your money, it’s important to know what form your money is in because this will inform you of possible fees or taxes you might incur, as well as what options are open to you when making plans for your money. Moving your money between one form or another can be a tricky and complicated business, so make sure you and your financial advisors are well advised about your financial strategy, so you don’t incur undue capital gains taxes or other hidden fees and costs.
5: The Cost of Your Money:
Maybe this is an odd question not many people consider, but when taking control of your money, you need to ask yourself what your money is costing you.
- Is it currently converted to its best form?
- What would that conversion cost?
- What kind of taxes am I paying on it where it is, and could I be paying fewer taxes if I kept it in a different structure?
These are important questions to ask, and yet they can be so overwhelming that not everyone does. But the costs of simply maintaining your money are just as important to consider as where your money came from, your money’s form, and the ultimate goals for your money.
These are the five axes that must be considered when taking control of your money:
1. Where did your money come from
2. What is your money doing
3. Where is your money going (short and long term,)
4. What form is your money in, and what is the cost of your money?
Addressing all these questions is complicated and may require some personal introspection. For the rest of it though, a Deferred Sales Trust may be an important financial tool.
A Deferred Sales Trust is a flexible, legal tool to help you take total control of your money. To define it simply, A Deferred Sales Trust is a trust you establish with a qualified third-party company for the purpose of controlling the sale of your properties or the disbursement of your capital. It answers the questions of where your money came from because it allows you to control the movement between your investments without having to worry about capital gains tax since the money’s movement is directed through the trust by you.
- It answers the question of what your money is doing because it allows you to direct your money freely, into other investments or properties.
- It answers the long and short-term questions of where your money is headed. This is because, while you can direct your money into further investments through the trust, a Deferred Sales Trust is also an ideal tool for bequeathing your financial legacy to your children and loved ones, making sure they get the full amount you intend to leave them.
- It also answers the question of what form your money is in by allowing you to invest tax-free in property or businesses, or even take tax-free payments on interest-only payments from your investments.
- And lastly, it allows you to control the cost of your money because, by keeping your money in the trust, it rescues you from capital gains taxes on the money you hold.
Thank you for reading this two-part article series on the five axes for taking control of your money and one tool that can help you assess them all.
To learn more contact Adam Ausloos 414-269-2600 Adam@defernow.com