Finding Your Free Bridges for Legitimate Tax Avoidance

Free Bridges in Tax Avoidance
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Supreme Court Justice Louis D. Brandeis (1856-1941) was a strong advocate of tax-wise giving, as noted in the following extract from his essay entitled, “Thoughts on Legitimate Tax Avoidance.”

I live in Alexandria, Virginia. Near the Supreme Court chambers is a toll bridge across the Potomac. When in a rush, I pay the dollar toll and get home early. However, I usually drive outside the downtown section of the city and cross the Potomac on a free bridge. This bridge was placed outside the downtown Washington, D.C. area to serve a useful social service: getting drivers to drive the extra mile to help alleviate congestion during rush hour.


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If I went over the toll bridge and through the barrier without paying the toll, I would be committing tax evasion. If, however, I drive the extra mile outside the city of Washington and take the free bridge, I am using a legitimate, logical and suitable method of tax avoidance, and I am performing a useful social service by doing so.

For my tax evasion, I should be punished. For my tax avoidance, I should be commended. The tragedy of life is so few people know that the free bridge even exists!

Find Your Free Bridge

#1: What is your largest expense? Hint: Taxes. Since most Americans don’t think they can do anything about their taxes, they don’t look at it as an expense.


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#2: What have you done to reduce these taxes by 20-50%? Combing-sequencing-timing of our 40 strategies.

#3: What have you done to create tax-free income for retirement? Only two ways: Roth IRAs and life insurance (ask us about leveraging your life insurance)

#4: How much of your retirement accounts are yours? Most affluent people believe that by investing in IRAs and other qualified plans that they have cut their taxes, but all they have done is deferred them and what they do not realize is that what they have done is compound their future tax bill. The larger the account gets, the more types of taxes at some point in the future including income taxes, and possibly estate taxes will be due. The IRS will be first in line.

#5: Most Americans have 401k and/or IRAs but they don’t know how to turn these into tax free income? If you have a business, using a profit sharing plan can enable you to reposition taxable dollars to tax free dollars. Referring back to question #2.


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#6: Do you know that you can have guaranteed tax-free income for life? Knowing what investment to put into a Roth IRA! Refer to question #2.

#7: Do you know that capital gains tax is voluntary? They are, but few people take the time to find out how.

#8: What have you done to protect yourself against lawsuits, liens and judgments? The United States is the most litigious country in the world. Even innocent mistakes can cost business owners and the affluent hundreds of thousands of dollars. All affluent people worry about lawsuits, liens, and judgments, but only a few take the action cover this risk.

#9: Did you know that the IRS will give you a tax deduction today for a charitable gift that you do not make until after you and your spouse pass away? Most affluent people love the idea of charitable planning from the prospective of giving back and reducing taxes. However, what they do not like is the idea of losing control of their assets, being poorer and perhaps even running out of money.

#10: Have you ever lost money in the stock market? Can you afford to lose it again? The vast majority of affluent people have never heard of indexed products that provides the upside potential of the stock market without the downside risk.

#11: Did you know there are processes available that will pay you tax-free income if you live too long, die too soon, or need long term-care insurance? The reality for all of us is that we will either live longer than expected, die sooner than intended, or need long-term care at some point in our lives.

#12: Did you know that with the proper sequencing and timing you could do Roth conversions tax free at a discount of 30%. Refer back to question 2.

#13: Do you know what your marginal tax bracket is versus your effective tax bracket? If you could reduce your tax rate to 18% or lower, how much income would you pile into this tax bracket? All of it!!!!!

Bill Newton

Bill Newton is President of Sterling Newton, a registered investment advisory firm in Jacksonville. As a virtual family office with a large national network of partners we address the following five areas of our clients’ financial lives: (1) making smart decisions about their money; (2) mitigating taxes; (3) taking care of heirs; (4) protecting assets from being unjustly taken; and (5) magnifying the power of charitable gifts.

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