Proactive tax planning is an essential component of any financial plan, but it’s especially important for ultra-high-net-worth families. Many affluent families have diverse income streams, complex investment portfolios, business ownership interests, multiple real estate holdings and more, which exposes them to significant tax liabilities. If not properly managed, these liabilities have the potential to significantly erode a family’s wealth, potentially by millions of dollars over a lifetime.
Fortunately, proactive tax planning could help support your wealth planning strategies and preserve your family’s financial legacy for future generations.
Tax Planning for Ultra-High-Net-Worth Individuals and Families
Tax planning refers to the ongoing process of employing various strategies to help minimize the amount you pay in taxes. The most effective tax planning strategies span various aspects of your financial life, including your investment portfolio, charitable giving initiatives, estate plan, income, retirement plan and more.
Taking a strategic and proactive approach to tax planning is especially important for ultra-high-net-worth individuals and high-net-worth families, because the various complexities of your financial life can expose you to additional tax risks. By working with a qualified wealth advisor and tax professional, you can understand how to minimize your tax liabilities, optimize your withholdings, maximize your deductions and apply relevant tax credits across all areas of your financial life. When combined, these high-net-worth tax strategies can result in significant tax savings over time.
Why Ultra-High-Net-Worth Tax Planning Is Essential
There are several reasons why ultra-high-net-worth tax planning is essential. It can help you:
- Mitigate income tax exposure – High-income earners face a top marginal income tax rate of 37% in 2025 as well as state and local taxes and the 3.8% net investment income tax (NIIT). Proactive tax planning through maximizing retirement contributions, implementing tax-loss harvesting and strategic Roth conversions can help reduce your income tax exposure significantly.
- Capitalize on opportunities –Proactive tax planning allows you to act quickly when opportunities arise. Market drops present opportunities to harvest investment losses that can be used to offset capital gains, while year-end tax planning enables strategic charitable donations and last-minute retirement contributions before December 31 deadlines.
- Navigate financial complexities –The complexities of business ownership interests, real estate, alternative investments and executive compensation expose you to additional tax risk. Strategic tax planning helps you see the big picture and coordinate all moving parts effectively across multiple entities, trusts and international assets.
- Preserve multigenerational wealth –Tax planning strategies can help reduce the value of your taxable estate, potentially saving loved ones significantly on estate taxes. Leveraging strategies like dynasty trusts, annual gifting, family limited partnerships (FLPs) and irrevocable life insurance trusts (ILITs) helps to preserve wealth for future generations. With the permanent $15 million estate tax exemption beginning in 2026 (and indexed for inflation annually thereafter), strategic estate planning becomes even more critical.
Key Strategies to Help Minimize UHNW Tax Liabilities
To navigate the complexities you face as an UHNW family, it’s important to think beyond basic tax deductions. The most effective tax optimization strategies span multiple aspects of your financial life, focusing on tax deferral, removing assets from your taxable estate and establishing sources of tax-exempt growth.
Harvest investment losses
Tax-loss harvesting is the process of selling an investment that has declined in value, realizing a loss on the sale and reinvesting those assets in a different, yet highly correlated, investment. When done correctly, your portfolio’s risk and return profile remain unchanged, but the realized loss generates a deduction. You can use up to $3,000 to offset ordinary income each year, with unlimited amounts available to offset capital gains. Losses exceeding $3,000 (after offsetting gains) can be carried over to future years indefinitely.
Understanding the wash sale rule
When tax-loss harvesting, be aware of the wash sale rule, which prevents investors from selling at a loss for the primary purpose of realizing a tax deduction. The rule is triggered when you sell an investment at a loss and purchase a “substantially similar” investment within 30 days prior to or after the sale. If triggered, the sale isn’t eligible for a tax deduction.
To avoid this, work with your wealth manager to purchase similar but not “substantially identical” securities, wait at least 31 days before repurchasing, and review transactions across all accounts you control, including IRAs and spousal accounts.
Strategically allocate your assets
Asset location is a tax-planning strategy that can help reduce your portfolio’s tax exposure and enhance your long-term returns by allocating tax-efficient investments to taxable accounts and tax-inefficient investments to tax-advantaged accounts.
For example, long-term stocks taxed at more favorable capital gains tax rates (0%, 15% or 20%, plus the 3.8% NIIT for high earners) belong in taxable accounts. In contrast, bonds, REITs and high-turnover funds generating ordinary income (taxed at rates of up to 37%) should be placed in tax-advantaged accounts like traditional IRAs or 401(k)s.
Roth IRAs and Roth 401(k)s should hold your highest-growth potential investments, as all future appreciation will be completely tax-free in retirement. For high-net-worth families with assets spanning multiple account types, strategic asset location could save tens of thousands annually.
Optimize your retirement savings
Diversify your retirement savings across accounts with different tax treatment to provide flexibility for a tax-efficient income stream in retirement while minimizing your current-year tax burden.
2025 contribution limits for common retirement accounts
- 401(k)/403(b) – $23,500 (under 50), $31,000 (age 50+), $34,750 (ages 60-63)
- IRA – $7,000 (under 50), $8,000 (age 50+)
- SEP IRA – Up to $69,000 or 25% of compensation
- Solo 401(k) – Up to $69,000 in combined contributions (plus catch-up, if eligible)
Health savings accounts (HSAs)
HSAs offer a rare triple tax advantage for high-net-worth families enrolled in high-deductible health plans, offering:
- Tax-deductible contributions (up to $4,300 per individual/$8,550 per family in 2025)
- Tax-free growth
- Tax-free withdrawals for qualified medical expenses
Consider a Roth conversion
If you’re like many UHNW families, your income exceeds the threshold for making contributions to a Roth IRA ($165,000-$175,000 for single filers and $246,000-$256,000 for married filing jointly in 2025). Fortunately, you may still be able to enjoy tax-exempt retirement withdrawals by converting a portion of your pre-tax retirement savings to an after-tax account.
A Roth conversion involves moving funds from a tax-deferred retirement account, such as a 401(k) or traditional IRA, to a Roth IRA. You’ll pay ordinary income tax on the amount converted, but once in the Roth account, the converted funds can grow tax-free and be withdrawn tax-free in retirement.
Key benefits of Roth conversions for high-net-worth families include:
- Tax-free growth on converted funds and tax-free withdrawals on all future earnings
- No required minimum distributions (RMDs) during your lifetime
- Estate planning advantages (Roth IRAs pass to beneficiaries tax-free)
- Tax diversification to help manage tax brackets in retirement strategically
Times to consider this strategy include:
- Low-income years
- When seeking bracket optimization (filling your current bracket without pushing into the next)
- Before you’ve started taking RMDs (before age 73)
- During market downturns, when converting depreciated assets minimizes the tax paid
Your wealth manager can help you execute this strategy in the most tax-efficient manner, coordinating with your overall financial plan.
Reduce your tax exposure on real estate sales
Real estate sales are subject to capital gains tax on profits. While an exclusion of up to $250,000 (single) or $500,000 (married) may apply to primary residence sales, it doesn’t apply to investment properties or business real estate.
1031 exchange
Section 1031 of the Internal Revenue Code (IRC) allows real estate investors to defer capital gains taxes by exchanging one business or investment property for another “like-kind” property.
Key requirements for 1031 exchanges include:
- Both properties must be used for business or investment purposes
- You must identify a replacement property within 45 days of sale
- You must complete the exchange within 180 days of sale
- The replacement property value must equal or exceed the sold property value for complete tax deferral
721 exchange
Similar to a 1031 exchange, a 721 exchange allows deferring capital gains on a property’s sale by transferring property to an umbrella partnership real estate trust (UPREIT) for 12 to 24 months. During this period, you receive dividend-like distributions while deferring capital gains tax. After the specified period, units convert to permanent REIT shares.
Advantages of 721 exchanges for UHNW families include:
- Diversification – Exchange a single property for fractional ownership in a diversified real estate portfolio
- Liquidity – REIT shares offer greater liquidity than direct property ownership
- Estate planning benefits – Heirs receive stepped-up cost basis on REIT shares at death
- Reduced management burden – Eliminate day-to-day property management responsibilities
Both strategies are complex, so work with a qualified wealth manager and tax advisor prior to executing.
Estate Planning Techniques to Preserve Your Wealth
Estate planning for ultra-high-net-worth families requires sophisticated strategies to preserve assets, minimize tax erosion and help ensure a lasting multigenerational legacy.
Strategic lifetime giving
In 2025, individuals can give up to $19,000 per year per gift recipient without incurring gift tax. Married couples can give $38,000 per recipient. These annual exclusion gifts don’t count toward your lifetime gift tax exclusion ($13.99 million in 2025, increasing to $15 million in 2026).
Direct payments for education or medical expenses
You can offer support in excess of the annual gift tax exclusion amount — without triggering reporting requirements or using your lifetime exemption — by making direct payments to educational institutions or medical providers.
529 College Savings Plans
A 529 plan offers tax-exempt growth and tax-free distributions for qualified educational expenses. And the IRS allows “superfunding,” or making five years’ worth of contributions in a single year. In 2025, you can contribute up to $95,000 in a single year per beneficiary individually, or $190,000 as a married couple, removing substantial assets and future growth from your taxable estate immediately.
Advanced trusts
Trusts provide UHNW families with control, privacy and tax efficiency as assets transfer across generations.
Spousal lifetime access trust (SLAT)
A SLAT is an irrevocable trust one spouse creates and funds for the other spouse’s benefit. Assets held within the SLAT and all associated appreciation are excluded from both spouses’ estates for estate tax purposes, while the beneficiary spouse can still access assets according to the trust’s distribution provisions. SLATs minimize eventual estate tax liability while maintaining access to assets throughout your lifetimes.
Irrevocable life insurance trust (ILIT)
An ILIT owns a life insurance policy, removing proceeds from your taxable estate. When the policy holder dies, the insurance policy’s death benefit is paid to the trust, not the estate, providing immediate tax-free liquidity to heirs. For UHNW families with illiquid assets like businesses or real estate, ILITs provide cash to cover estate tax liabilities without forcing asset liquidation.
Dynasty trust
A dynasty trust facilitates wealth transfers to grandchildren and future generations while avoiding estate taxes at each generation. By allocating your generation-skipping transfer (GST) tax exemption, you create a wealth preservation vehicle avoiding estate tax, potentially for 1,000 years or in perpetuity.
The Tax Benefits of Charitable Giving
Strategic charitable giving strategies maximize philanthropic impact while reducing your long-term tax exposure.
Your charitable donations help reduce your tax burden through:
- Income tax deductions –Deduct donations up to 60% of AGI for cash gifts or 30% of AGI for appreciated assets.
- Reduced estate tax exposure – Charitable gifts reduce your taxable estate.
- Capital gains tax minimization –In-kind donations of appreciated assets avoid capital gains tax.
Top Charitable Giving Strategies
Several top charitable giving strategies are discussed below.
Donor-advised fund (DAF)
A DAF is a 501(c)(3) charitable giving vehicle that receives irrevocable charitable gifts and holds them until you’re ready to distribute them to charities. You receive a tax deduction when you contribute to the DAF, then allocate gifts to charities over time. This strategy is particularly effective during high-income years — from large bonuses, inheritances, stock awards or business sales — allowing you to maximize your tax deduction when it provides the most value.
Qualified charitable distribution (QCD)
If you’re taking required minimum distributions (RMDs) from your tax-deferred retirement accounts, a QCD can reduce your tax exposure while fulfilling your charitable giving objectives. In 2025, transfer up to $108,000 per individual ($216,000 per married couple) directly from your IRA to charity. The distribution is excluded from your annual income and doesn’t impact your AGI, potentially lowering Medicare premiums and taxes on Social Security. QCDs are available starting at age 70 ½ and satisfy RMD requirements (beginning at age 73) without increasing taxable income.
In-kind donation of appreciated assets
Rather than making cash donations, donate appreciated securities or real estate held more than one year. You can avoid paying capital gains tax on appreciation while deducting the full market value. For example, stock purchased for $10,000 that’s now worth $50,000 generates a $50,000 tax deduction while avoiding capital gains tax on the $40,000 appreciation, saving approximately $28,000 in taxes for taxpayers in the 37% bracket.
Help maximize your tax savings before December 31, 2025, with this comprehensive checklist:
Investment portfolio and tax-loss harvesting
☐ Review your portfolio for tax-loss harvesting opportunities.
☐ Confirm harvested losses settle by December 31.
☐ Verify no wash sale violations across all family accounts.
☐ Rebalance your portfolio for optimal asset location.
Retirement accounts and conversions
☐ Maximize 401(k)/403(b) contributions (verify final payroll deductions).
☐ Evaluate strategic Roth conversions to fill lower tax brackets.
☐ Take required minimum distributions (RMDs) if over age 73 (avoid 25% penalty).
☐ Review beneficiary designations on all retirement accounts.
☐ Maximize HSA contributions ($4,300 individual/$8,550 family).
Charitable giving strategies
☐ Accelerate charitable donations before year-end.
☐ Donate appreciated securities instead of cash.
☐ Establish or contribute to a donor-advised fund (DAF).
☐ Execute qualified charitable distributions (QCDs) if age 70 ½ or older (up to $108,000).
Estate planning and gifting
☐ Make annual exclusion gifts before year-end ($19,000 per recipient, $38,000 for couples).
☐ Consider superfunding 529 plans ($95,000/$190,000 five-year election).
☐ Review and update estate plan documents.
☐ Evaluate SLAT, GRAT, ILIT or dynasty trust opportunities.
Real estate and business planning
☐ Evaluate 1031 exchange opportunities for investment property sales.
☐ Consider 721 UPREIT exchange for legacy real estate transition.
☐ Review real estate depreciation schedules and cost segregation opportunities.
☐ Defer or accelerate business income/expenses based on tax bracket projections.
Professional review
☐ Schedule a year-end tax planning meeting with your wealth advisor and CPA.
☐ Project your 2026 tax liability and adjust estimated payments.
☐ Update your financial plan with current asset values and tax projections.
Take Action: Your Year-End Tax Planning Next Steps
Tax planning for ultra-high-net-worth individuals is a vital component of a healthy financial life. The benefits of optimizing your strategic tax planning strategies can extend across multiple generations, allowing you to maximize your wealth-building potential and leave a lasting financial legacy.
However, the complexities of tax planning can result in significant penalties, taxes and missed opportunities if not properly navigated.
At Creative Planning, our wealth managers and tax professionals work together to implement strategic tax planning strategies across all aspects of our clients’ financial lives. We provide dedicated support for high-net-worth and ultra-high-net-worth individuals and families as part of our comprehensive wealth management offerings.
Our integrated approach includes:
- Proactive year-end tax planning to help minimize your current-year tax burden
- Advanced estate planning, with in-house attorneys designing sophisticated trust structures
- Investment tax optimization through asset location, Roth conversions and tax-loss harvesting
- Charitable giving strategies that help to maximize both philanthropic impact and tax benefits
- Integrated family office services for ultra-high-net-worth families
By integrating tax planning strategies across your entire financial plan, we help ensure your wealth serves not only yourself but also future generations of loved ones.
