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Sarah and David

CASE STUDY 01 : AGE 62 and 63

Family Financial Strategy for Wealth Accumulation

Primary Goals:

Reduce taxes, improve investments, and create a reliable
income stream in retirement.


Meet Sarah and David, a married couple in their 40s, with five children ranging from 6 to 12 years old. Sarah's income as a successful realtor varies, ranging from $100,000 to $500,000 per year, while David is a dentist with an annual income of $300,000 from his practice. This case study highlights their dynamic financial situation, marked by high income, family responsibilities, and an innovative tax strategy through a DOS Analysis.



Sarah and David's family includes three 6-year-old triplets and two older children, aged 10 and 12. Their combined income ranges widely, and they face substantial tax obligations. Their primary goals are to accumulate wealth, secure their children's education, and plan for a comfortable retirement.


1. Variable Income and Tax Challenges: Sarah's fluctuating income creates uncertainty in their financial planning, and their combined high income results in significant tax liabilities.  They must be careful of too much debt or fixed expenses that are too high due to wide swings in income.  
2. Wealth Accumulation and Tax Efficiency: Balancing wealth accumulation, tax optimization, and family responsibilities poses challenges for the couple.  But, it also presents some powerful tax planning opportunities.



1. Income Range: Sarah and David have a substantial income potential, which can be harnessed to build wealth rapidly. They also both run businesses which gives them additional tools for powerful tax planning opportunities.
2. Diverse Assets: The couple holds $350,000 in non-qualified investment accounts and has three rental properties with approximately $100,000 equity each, despite existing mortgages. They also have strong income which can be harnessed to create pools of “dry powder” which can be used to invest aggressively when assets, such as real estate, are on sale (recessions).

3. Tax-Efficient Wealth Accumulation: Exploring tax free and tax deferred investment strategies can be especially powerful given their high income/high tax brackets combined with time.  Time is their friend as we can defer and/or grow tax free for a solid 20 plus years until they retire.  Strategies such as a maximum cash value Indexed Universal Life (IUL) insurance policy offers a unique opportunity for tax-free accumulation and withdrawal. This policy can serve as a "dry powder" reserve for opportunistic investments.



1. Tax-Efficient Investment Strategy: Sarah and David should consider utilizing a maximum cash value IUL insurance policy, which allows them to accumulate cash value tax-free and access it when opportunities arise, such as investing in rental properties during market downturns. The policy must be meticulously designed utilizing low cost policies or blending non-commissionable term to make the policy powerful for tax free accumulation of wealth and for family protection.
2. Real Estate Investment: The couple can use the "dry powder" accumulated in the IUL policy to purchase additional rental properties when the real estate market experiences a significant dip. With a 20% down payment, they can acquire several properties during favorable market conditions. Assuming an ultimate rebound in real estate markets, this strategy can create substantial long term wealth.

3. Children's Involvement: Sarah and David can engage their children in their businesses by having them create marketing videos. Paying each child for their work can result in a tax-advantaged income stream, shielding up to $60,000 per year from taxes until each child reaches 18. These funds can be allocated toward the children's college education and also contribute to their future retirements.  This strategy can shield well over a million from their taxable income over the next decade.  This is but one of the tax strategies that they can implement.
4. Retirement Plans:  Given that they both own their own businesses, they have the opportunity to set up a variety of retirement/pension plans, health savings accounts, and profit sharing plans which can allow them collectively to defer from $100k to $300k of income per year.   



By systematically addressing Dangers, leveraging Opportunities, and implementing Solutions, Sarah and David are poised for financial success. They benefit from a tax-efficient wealth accumulation strategy using proactive tax planning opportunities to seize opportunities during normal markets and to seize outsized returns with their “dry powder” tax strategies when markets are on sale. This innovative approach empowers them to build tax-efficient wealth through real estate investments and leverages their children's involvement in their businesses to save significantly on taxes. Sarah and David's financial journey exemplifies the importance of strategic financial planning, tax optimization, and creativity in securing their family's financial future while building a legacy for their children.

NOTE: The preceding case study is hypothetical in nature and does not pertain to any real WE Alliance Wealth Advisors’ client. None of the information presented should be interpreted by a client or potential client as a guarantee that they will achieve similar results or satisfaction levels if they engage WE Alliance’s investment advisory services.

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