Month: May 2025

Managing a productive vegetable garden for longevity is a far more complicated endeavor than most young gardeners understand. Since the four main crop types require different primary nutrients, annual plant rotation must be practiced to deter nutrient depletion. This necessitates an education in companion planting, or the proximate placement of ‘like’ species to save water and space while accessing primary nutrients towards maximum productivity. The nutrient base must still be replenished continually while controlling the PH balance, and a weed control program is required to ensure all fruit feeds the family, not bugs and critters. This is just the beginning of the program!

Building wealth during one’s lifetime, like tending a vegetable garden for a season, is an attainable goal for anyone willing to work hard, spend less than net earnings on subsistence, and invest the difference productively. Retaining wealth multi-generationally, however, like tending a productive garden for a lifetime, is a feat requiring higher levels of planning and is reserved exclusively for the very intentional wealth builder. Consider the four tiers of financial planning critical to multigenerational wealth retention:

• A Retirement Plan takes every factor into consideration to reveal the extent to which a future retirement is funded and provides specific solutions to resolve projected deficiencies. A sound retirement plan makes conservative assumptions with unknown factors, like future rates of return, tax rates, inflation rates, and increases in Social Security payments. It should be the first plan we construct because higher levels of planning for an estate that will be depleted trying to fund retirement may be a waste of precious resources.

• An Estate Plan seeks to maximize the efficiency and success with which wealth is distributed at the end of each generation’s earthly habitation. It also expresses the deepest convictions and purposes behind a person’s wealth-building efforts, and as such, once in place will become the guiding, or authoritative plan (read, “Estate Planning is a Vital Family Enterprise”, 7/10/2023). Work with an attorney who specializes in estate planning in your ultimate state of residence, and whom you trust and communicate well with.

• A Tax Plan, unlike tax preparation or tax management (read “Differentiating Tax Management and Tax Planning”, 5/16/2025), involves the use of special tools to minimize lifetime taxes, or even taxes over multiple generations to complement a family’s multigenerational wealth-building efforts. The thesis behind tax planning is to intentionally pay more taxes in low bracket years (and less taxes in high bracket years), with the goal of never missing a highly beneficial tax maneuver due to ignorance. Tax planning exceeds the habitual minimization of annual taxes in both purpose and effect.

• A Logistical Income Plan (read, “Planning the Intelligent Income Stream”, 9/20/2024) creatively identifies the right mix of the right income sources at the right time to source retirement income needs most efficiently, and in a manner consistent with one’s retirement, estate, and tax plans; now that is an exciting puzzle to solve!

May we remember to be generous with those in need as we strive to be good stewards with that which Adonai has entrusted to us, Shaun.

“I want to give my children enough money to do something, but not enough to do nothing” ~George Clooney in “The Descendants”

“Wealth gathered hastily will dwindle, but whoever gathers little by little will increase it.” ~Proverbs 13:11

The opinions voiced in this material are general and are not intended to provide specific recommendations.

While mingling at Ed Slott’s Elite IRA Advisor Conference this week, an intrigued gentleman asked me to explain the difference between hiking and climbing. He seemed satisfied with the simple truth that hiking becomes climbing when special tools are required to give the mountaineer a technical advantage to safely ascend otherwise dangerous terrain. This seems to me a good analogy to express the vast difference between tax management, or the rote minimization of taxes every year, which resembles hiking, and tax planning, which involves the use of special tools to minimize lifetime taxes, or even taxes over multiple generations to complement a family’s multigenerational wealth-building efforts, which better resembles climbing. I’d like to peel a layer or two from this onion in an attempt to convince you that tax planning far exceeds tax management in both purpose and effect.

Tax preparation is the simple task of preparing a tax return to be filed, and in our analogy equates to packing the kit for a hike (but does not actually involve hiking or climbing). Many of you have expressed frustration in how seldom your CPA goes beyond preparing your return to offer useful tax counsel. I believe the issue is sufficient to warrant offering such a professional the ultimatum due to the excessive hidden cost of their non-participation. That said, mere tax management may actually be a costly copout masquerading as thinking or wisdom. The vast majority of the financial plans I construct indicate future RMDs will alone push the IRA holder into a higher tax bracket by mid-retirement, which doesn’t even account for the possibility of a future income tax hike! Do you think tax rates might increase when the printing press is removed from the central bank, an event history suggests may be a certainty? How about our unfunded social programs, interest on the national debt and yearly deficits, might these present a need for higher government revenues in your lifetime, or if you are a multigenerational wealth-builder, the lifetimes of your children?

There are important reasons why families that are successful at building and retaining wealth multi-generationally appropriate significant energy and investment towards advanced tax planning, and here are some of the beneficial strategies they utilize:

• Health Savings Accounts offer the most beneficial tax treatment in the U.S., providing the money is used to cover eligible future medical expenses, combining the tax deductibility of contributions offered by the Traditional IRA with the tax-deferred growth and tax free withdrawals of the Roth IRA.

• Roth IRAs funded by after-tax contributions, conversions from non-deductible Traditional IRAs (Back Door Roth), or Strategic Roth Conversions during low-bracket years, which offer tax deferred growth and tax-free withdrawals for the lifetime of the account owner (once the 5-year rule is satisfied) AND for 10 additional years for non-eligible designated beneficiaries.

• Qualified Charitable Distributions (starting at age 701/2) allow for tax-free withdrawals from Traditional IRAs when paid directly to a 501(c)(3) charitable organization, reducing future RMDs which can otherwise push an account holder into a higher bracket and increase both Medicare surcharges and taxes on Social Security payments.

• Net Unrealized Appreciation (NUA) allows the highly appreciated company stock held in a 401(k) to be taxed as a capital gain instead of as income. Speak with a professional and do not attempt to process this yourself.

• Section 327 allows surviving spouses to elect to be treated as the deceased employee for the purpose of RMDs, which can meaningfully reduce mandatory taxable distributions.

• Timing the downsizing of a primary residence around appreciation approaching the capital gain exemption limit ($250,000 for individuals and $500,000 for married couples who co-own and cohabit a home) resets the clock on capital gain exemptions.

• 1031 and 721 tax-free real estate exchanges defer capital gains taxes on highly appreciated real estate investment properties, and in cases where the account holder dies still owning the UP-REIT, can eradicate them to the next generation due to the step-up in basis.

These are but some of the ways savvy tax planning can reduce the burden of taxes on a family, yet sufficient evidence suggesting the benefits of tax planning far exceed mere tax management. God bless your efforts towards stewardship, Shaun.

“A wise man leaves an inheritance to his children’s children.” ~Proverbs 13:22

The opinions voiced in this material are general and are not intended to provide specific recommendations. The economic forecasts set forth in this commentary may not develop as predicted. Diversification of portfolio holdings does not necessarily protect against loss or guarantee returns.

President Trump’s tariffs are a ploy to reduce the U.S. trade imbalance and restore domestic manufacturing, but initiative goals indicate the replacement of tens of millions of foreign production jobs,¹ by a U.S. economy with only 7 million working-age unemployed, and only 2 million receiving benefits.² The extent to which the President will achieve his “re-shoring” goals in four years’ time is still in question, but whether man or machine will perform the vast majority of all new manufacturing jobs in America, is not. Add expensive labor costs and a lack of trade skills to America’s worker shortage problem, and we may have the recipe for a robotics explosion in America.

I know a successful third generation dairy farmer whose boys didn’t want to destroy their knees milking cows just because their ancestors did. Two milking robots later the boys are on the farm with healthy knees, the quality of life seems to be improved for everyone on the farm, the cows are noticeably happier and produce better, and the farm is a more profitable enterprise with a sturdier future, even considering the cost of two robots and a new barn.  This farmer made a wise decision, and his may be a textbook case study for what is about to play out across the U.S. manufacturing sector. Since, as investors, we deal in probabilities not certainties, let’s consider the set-up for this potential opportunity and the associated risks in the hope we can formulate an educated opinion on the matter, and later adopt an investment strategy with it.

The Set-Up

• The extent to which the Trump Administration can displace foreign manufacturing jobs with American jobs a strong demand will exist for functional automation.

• Artificial Intelligence (AI) is in place to drive and manage a surge in U.S. manufacturing with greater proficiency than ever.

• Highly functional and reliable robotic technology is in place and continues to develop.

• U.S. investors are sitting on $7 Trillion in cash today, a sum capable of fueling a surge in functional automation.³

The Risks for Derailment

• The Trump administration may fall short of securing anticipated trade deals, reducing the U.S. trade deficit, and reshoring tens of millions of manufacturing jobs, in which case anticipated demand for robots would fall short.

• Tariff uncertainties may introduce a near-term global recession/bear market that could stifle demand, reduce investment and delay a surge in U.S. robotics manufacturing.

• AI is in the development stage and lacks the energy infrastructure and energy production necessary to drive and manage an explosion in functional automation.

As you consider what actions this information should invigorate, I suggest:

• “Think, don’t act” as you do your due diligence, especially since the robotics sector and machinery industry are in bearish mode.⁴

• Start building a “Watch List” of businesses which dominate robotics production and implementation in America.

• Remember as you search for industry dominators that capital efficiency and free cash flow matter, especially in a developing industry with a potential recession on the horizon.

• Follow the tariff story and maintain a thoughtful assessment of the evolving probability Trump can achieve his U.S. manufacturing objectives.

• Think about how you will raise the necessary cash to capitalize on this investment opportunity, should it fully develop, when the Robotic sector turn bullish.

Think about it, and may the good Lord bless your efforts towards excellence in investing.

Shaun.

“Do you see a man skillful in his work? He will stand before kings; he will not stand before obscure men.” ~Proverbs 22: 29

1,3 TradeSmith Daily, “Made in the USA, But Not by Humans”, April 30, 2025

2 AI Overview, Bureau of Labor Statistics, “US Unemployed”, May 2, 2025

4 Chaikin Analytics, Power Gauge, “BOTZ”, May 2, 2025

The opinions voiced in this material are general and are not intended to provide specific recommendations. The economic forecasts set forth in this commentary may not develop as predicted. Diversification of portfolio holdings does not necessarily protect against loss or guarantee returns.