If you have more than $1 million in investable assets, you already understand that wealth brings both opportunity and complexity. Alongside growth comes a greater set of challenges; one of the most pressing being how to manage the tax burdens that can quietly erode what you’ve built. Without a well-designed tax planning strategy, a significant portion of your wealth could eventually slip away instead of benefiting the people and causes you care about.
A deliberate approach to tax planning helps preserve your wealth and provides clarity about how your family’s financial future is being managed.
At BCR Wealth Strategies, we work with individuals and families who prefer to hand over the day-to-day oversight of their wealth to a team of experienced Birmingham financial advisors. Our clients value having fiduciary professionals who not only create and monitor a financial plan but also stay engaged through life transitions, market shifts, and changes in tax law that may impact their long-term strategy.
In this blog, we’ll share tax planning strategies often incorporated into our Birmingham wealth management services. Think of these as key areas to evaluate with your own advisor, or as a way to identify opportunities you may not be taking advantage of today.
1. Maintain an Emergency Fund (First Line of Defense)
Even if your portfolio exceeds $1 million, having a portion of it liquid for emergencies should not be overlooked. Having an emergency or cash fund should act as a buffer so you don’t have to liquidate appreciated investments at inopportune times (and incur unnecessary capital gains or penalties).
In practice, we often advise our clients to maintain three to six months of cash reserves to cover living and/or business expenses. This type of buffer provides you with breathing room, allowing your investment portfolio to remain intact during short-term market stress without triggering tax events.
Watch our short video on the importance of tax-smart investing strategies.
2. Max Out Retirement Contributions (Capture Compounding and Tax-Deferred Growth)
Think of your retirement accounts as one of the simplest ways to give your wealth more room to grow. Utilizing retirement accounts is one of the most powerful tools for tax-efficient growth; yet, surprisingly, many high-net-worth individuals underutilize them.
Maxing out your retirement contributions can make a noticeable difference over time. Your goal should be to shift as much growth as possible into tax-advantaged accounts. Over decades, compounding inside those accounts can dramatically reduce taxable drag:
401(k) / 403(b) / Defined Contribution Plans (2025)
- Employee elective deferral limit: $23,500 ($24,500 in 2026)
- Total combined (employee + employer) limit: $70,000 ($72,000 in 2026)
- Catch-up contributions for age 50+ (standard): $7,500 ($8,000 in 2026)
- Enhanced “super-catch-up” for ages 60–63 (if plan allows): $11,250 ($11,500 in 2026)
- If your employer offers a profit-sharing or matching plan, push for the full match and consider going beyond it.
- They can defer tax recognition until future years when your income may be lower
SEP IRA (2025)
- The lesser of 25% of compensation or $70,000 for 2025 (The lesser of 25% of compensation or $72,000 in 2026)
- No catch-up contributions allowed in SEP IRAs
- Depending on your income and tax bracket, you may rely on nondeductible or conversion strategies to get money into Roth accounts.
SIMPLE IRA (or SIMPLE Plans)
- Employee contribution limit: $16,500 ($17,000 in 2026)
- Catch-up contribution (age 50+): $3,500 ($4,000 in 2026)
- For those aged 60–63, a higher catch-up of $5,250 (for plans that allow it)
3. Strategically Locate Assets (Reduce Future Taxes)
While you can’t defray every tax, you can influence where they occur. Asset location refers to placing different types of investments in the most tax-efficient accounts. This layering helps minimize needless tax drag over time.
Here are typical rules of thumb:
- Place tax-inefficient investments (e.g., taxable bonds, REITs, master limited partnerships) inside retirement or deferred accounts.
- Place tax-efficient assets (e.g., index equity funds, municipal bonds) in taxable accounts, since they already benefit from favorable tax treatment (like qualified dividends or tax-free interest).
- Use tax-managed equity funds in taxable accounts; these funds are designed to harvest losses or limit turnover intentionally.
- Rebalance by transferring across account types (where permitted) rather than triggering sales in taxable accounts alone.
4. Harvest Tax Losses (Offset Gains Proactively)
When the market dips, there can be a silver lining. Selling investments that have lost value, known as tax-loss harvesting, lets you use those losses to offset gains elsewhere in your portfolio. In some cases, you can even apply up to $3,000 against ordinary income each year.
Handled thoughtfully, this strategy can help trim your tax bill without changing the overall direction of your long-term plan. The key is discipline: knowing when to act, what to sell, and how to reinvest without running into wash-sale rules or other pitfalls.
Because the details can become complex, many families prefer to have a financial advisor in Birmingham handle tax-loss harvesting as part of their comprehensive wealth management strategy. It’s one of those areas where professional oversight can make the difference between a smart move and an expensive mistake
5. Use Charitable Giving Strategically
If philanthropy is part of your legacy plan, ensure your estate plan is aligned to capture the various tax benefits available to you. These tools enable you to support causes you care about while also capturing tax efficiencies, a type of planning that ties financial planning to your deeper values.
Here are a few tax planning strategies to consider:
- Donate appreciated securities rather than cash. You avoid capital gains, and the full market value often qualifies as a deduction.
- Donor-advised funds (DAFs): You receive the deduction when you fund the DAF, but you can distribute grants over time.
- Charitable remainder trusts/charitable lead trusts: More sophisticated vehicles that can deliver income or tax benefits now and later, to you or heirs.
- Bunching gifts: Instead of annual giving, you concentrate several years of giving into one year to surpass deduction thresholds.
Watch: How to Enhance Your Charitable Giving Strategies.
6. Gift and Estate Planning (Shift Wealth Intelligently)
When you’ve worked hard to build significant wealth, it’s natural to start thinking about how it will one day be passed on. Gift and estate planning isn’t just about taxes; it’s about making intentional choices so your wealth supports the people and causes you care about in the way you want.
By implementing the right strategies, you can transfer assets thoughtfully, minimize unnecessary costs, and create a legacy that reflects your values.
A few strategies we use with our clients include:
- Use the annual gift exclusion (currently $19,000 per person, per year in 2025) to transfer wealth free of gift tax.
- Leverage your lifetime gift and estate tax exemptions (currently 13.99 million per person as of 2025, but subject to change).
- Irrevocable trusts (e.g., Grantor Retained Annuity Trusts, Spousal Lifetime Access Trusts) to transfer assets while retaining access or income.
- Dynasty trusts or generation-skipping planning to protect wealth across multiple generations.
- Coordinate with your estate attorney on valuation discounts, grantor trust strategies, and basis adjustment planning.
Our CFP® professionals in Birmingham will work with you to integrate tax, legal, and investment planning, ensuring that no single piece works in isolation.
7. State and Local Tax Awareness (Don’t Miss the Nuances)
It’s easy to focus on federal taxes and overlook possible state tax exposure. But state and local taxes can have just as much impact on your bottom line, especially if you live in Alabama or split time between multiple states.
Property taxes, homestead exemptions, and how retirement withdrawals are treated can all add up. Paying attention to these details can help you avoid unpleasant surprises and keep more of your wealth working the way you intend:
- State income tax rates and how they treat retirement withdrawals
- Property tax assessments and deductions
- Homestead exemptions or protections available in Alabama
- How state rules treat trust income distributions or estate tax triggers
Even if your assets are spread across multiple states, a coordinated approach helps avoid surprises.
8. Periodic Review & Proactive Adjustments
Life happens: tax codes change, you move, family events occur, and your goals may evolve. That’s why static plans don’t serve high-net-worth clients well. Your tax planning strategy should be reviewed regularly to ensure it continues to address your current and future needs.
At BCR Wealth, we run “what-if” models that look at:
- If tax brackets shift upward or downward
- If you decide to retire earlier or take a sabbatical
- If you sell a business or real estate holdings
- If legislation changes how trusts are taxed
A comprehensive tax plan is a living document and should be an integral part of your broader financial plan, not a one-time add-on.
9. Professional Coordination (Fiduciary Teamwork)
With $1 million or more in investable assets, you should consider working with a financial advisor in Birmingham, AL who can serve as your financial quarterback, coordinating tax, investment, and legal advice.
This is precisely how we operate at BCR Wealth Strategies: our CPAs, CFP® professionals, estate attorneys, and investment team coordinate under one umbrella.
Your advisor should spot tax risks in your investment decisions.
Your tax strategist should see the long-term investment implications of decisions. When these functions talk to one another rather than work separately, that’s when the most value is created.
You didn’t build your wealth by accident. You likely made wise decisions in business, real estate, or other high-earning roles. Now the question is: how do you preserve and pass on that wealth most effectively?
Suppose you attempt to execute this on your own. In that case, you’ll likely leave opportunities on the table or make costly errors if you don’t have the knowledge, patience, or experience to handle complex investment and tax-efficient strategies. You also lose peace of mind because you have to monitor every detail yourself.
By working with a wealth management team that handles investment management, financial planning, and tax planning under a unified approach, you can free yourself to focus on what matters most: family, purpose, and impact, rather than tax codes or shifting legislation.
We would welcome the opportunity to discuss your needs. We’ll help you assess whether your current advisor is capturing all the tax benefits you deserve, and whether you’re positioned to grow and protect your family wealth with clarity and confidence.
