The Situation

Now that tax season is over, we’ve been meeting with individuals and families to discuss what their tax return is really telling them about their overall financial picture.

We recently met with Mark and Linda (names changed for privacy), a married couple in their mid-50s earning around $450,000 a year, with $5 million in investable assets. About $2 million sits in taxable brokerage accounts (many Vanguard holdings) with the rest in retirement accounts like their 401(k)s and IRAs. They average a $10,000 donation to their favorite charity every year.

On paper, they were doing everything right by saving responsibly, investing consistently, and giving back to their community. But when we sat down for a financial review, we noticed that while their portfolio was built for growth, it was never stress-tested for tax planning, which unfortunately, is an all-too-common scenario we see in our firm fairly often.

The Diagnosis

As we went through their tax return alongside a full financial plan, we looked across every account and found that while their taxable brokerage account had a phenomenal year, it was generating enormous amounts of interest, dividends, and short-term capital gains. All of that income was stacking right on top of their salary and inflating their tax bill far more than it needed to.

“It’s not about having the right investments. It’s about holding investments right.”

Their investments themselves weren’t the problem. It was that they had the wrong investments in the wrong accounts. Within their taxable account, we found significant overlap, where they owned a blended Vanguard fund that was largely composed of the same individual positions they already held separately. They were doubling up on the same exposure without realizing it, generating unnecessary taxable distributions and a bigger tax bill with no added diversification.

Meanwhile, their retirement accounts (where tax-deferred treatment already shields growth from annual taxation) held positions that would have been perfectly fine in a taxable setting. Their allocation was working against them.

The Solution

We rebuilt their approach using three strategies that worked in concert, with minimal tax cost to execute.

1. A Donor-Advised Fund to Front-Load Giving
Instead of writing $10,000 in checks every year, we recommended Mark and Linda transfer highly appreciated ETFs directly into a donor-advised fund (DAF). This created a $60,000 charitable deduction and avoided capital gains tax on those shares entirely. The DAF acts like a charitable checking account, where they still give to the same organizations on the same schedule, but with dramatically better tax efficiency. Plus, the money inside the DAF can continue to grow, potentially increasing their charitable impact over time.

2. Capital Loss Carryforward
Mark and Linda had roughly $58,000 in capital loss carryforwards from prior years. We paired those losses with the DAF deduction to offset nearly $120,000 in long-term capital gains generated when we repositioned the portfolio, which is how we made the whole transition essentially tax neutral.

3. Two Structured Annuities as Smart Replacements
We used approximately $1.2 million from the sale of their tax-inefficient fixed income and overlapping ETF positions to fund two annuities, each serving a distinct purpose:

The first acts as a conservative bond proxy—zero fees, downside protection, and tax-deferred growth. It replaces the fixed-income drag that was generating taxable income every year.

The second offers a 20% downside buffer with up to 200% upside participation, which again, zero fees, a standard return-of-premium death benefit, and equity-like growth potential. It gives them substantial market participation with a defined floor underneath them.

Together, these two buckets do what their old Vanguard positions couldn’t do, which is grow tax-deferred, reduce portfolio volatility, eliminate fees, and still capture equity-like upside. One can be earmarked for guaranteed retirement income down the road, and the other serves as a volatility reducer within their broader portfolio.

The Result

The combined impact of these strategies saves Mark and Linda approximately $16,000 in taxes every single year. We effectively found them a way to keep more of what they make just by restructuring what they already had. They didn’t take on more risk either. They actually reduced their overall portfolio risk, eliminated fund overlap, dropped their investment fees to zero on that portion of the portfolio, and positioned themselves for better risk-adjusted returns going forward.

The Lesson

The right investments in the wrong accounts can cost you a fortune. Because at the end of the day, the smartest financial plan is about keeping more of what you’ve already built.

Contact our office to schedule a review and find out what your tax return is telling you about your financial picture.