Elective 2 - WMCP 360: Wealth Management
WMCP 360 addresses integrated wealth management for clients with substantial assets: investment policy, tax-efficient asset location, estate transfer and coordination of a professional team. Items test whether a recommendation fits the whole balance sheet and the family's goals, not just the portfolio.
Investment policy statement
State objectives (growth, income, capital preservation) and constraints: liquidity, time horizon, tax, legal and regulatory, and unique circumstances. Include risk tolerance, rebalancing policy, benchmark and review cycle. The IPS is the anchor when markets move.
Tax efficiency and asset location
- Place tax-inefficient assets (taxable bonds, REITs) in tax-deferred accounts; tax-efficient equity index funds in taxable accounts; highest-growth assets in Roth.
- Tax-loss harvesting offsets realized gains; the wash-sale rule disallows a loss if a substantially identical security is bought within 30 days before or after the sale.
- Taxable assets receive a step-up in basis at death; IRAs and other retirement accounts do not.
- Charitable tools: qualified charitable distributions from an IRA at 70½, donor-advised funds to bunch deductions.
Estate transfer
- Titling and beneficiary designations control assets, not the will.
- Annual exclusion gifts are $19,000 per donee in 2025; the lifetime exemption is statutory and changes with legislation - verify the current figure.
- Revocable trusts address incapacity and privacy; irrevocable trusts and ILITs remove assets from the taxable estate. Portability of an unused exemption requires a timely Form 706.
Risk and business owners
Umbrella liability, long-term care, disability buy-out, key person coverage, and a buy-sell agreement funded with life insurance.
Worked example
Balance sheet: $1.2M taxable (very low basis), $1M traditional IRA, $800,000 Roth. Hold the entire bond allocation inside the IRA; keep equity index funds in the taxable and Roth accounts. Reasoning: bond interest is taxed as ordinary income every year, and the IRA will be taxed as ordinary income on distribution anyway, so sheltering the inefficient asset saves the most tax. Because the taxable stock has a low basis, it is held for the step-up at death and rebalancing is done inside the IRA or with new contributions.
Traps that cost marks
- Rebalancing the taxable account and realizing avoidable gains.
- Relying on a will when a beneficiary designation names an ex-spouse.
- Creating a trust but never retitling assets into it.
- Assuming the estate tax exemption is permanent.
- Using one identical allocation across taxable, deferred and Roth accounts.