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Continue Growing & Protecting Your Wealth

Learn How To Defer Your Capital Gains Tax Here

It's often said the way to wealth is to concentrate. You built your wealth through concentrated ownership in a business, or real estate and like the redwood tree, have reached greater heights.

Just like the top of the redwood, you are starting to branch out more and diversify. You are coming into a new phase of life, where protecting what you've built and having access to cash are becoming more of a priority.

We all exit our businesses, or real estate, in one way or another. 

What's your plan to exit gracefully and ensure loved ones are cared for?

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Questions You Might Ask Yourself

Can I Defer My Capital Gains From Selling a Business or Real Estate?

Yes! Are you wanting a way out of your business or real estate, but are holding back due to concerns about potential capital gains tax being owed?

The Deferred Sales Trust strategy could help relieve that pain and unlock your potential to take the next step forwards in your life.

This capital gains tax deferral tool could save you thousands of dollars, and at the same time, have the opportunity to make a profit on the money you would have paid to Uncle Sam in the year of the sale.

The Deferred Sales Trust is simply an installment sale housed in a third-party trust. So you receive the tax benefits of the installment sale method by stretching out your income payments, while also not being tied to the credit risk of the buyer over time.

Another powerful benefit is being able to invest the first-year tax savings for growth, rather than let it sit. 

The Deferred Sales Trust can help you save on capital gains from:

  • Exiting a business 
  • Saving a failing 1031 exchange
  • Selling real estate holdings for liquidity
  • Diversifying out of most concentrated investments

Here's an example. Meet Samuel, a business owner looking to exit his business. Samuel knows he can get around $5mm net of closing costs. Samuel is also wanting to live on around $120,000 per year after the sale.

View the example below showing the costs in the year of sale.

Direct Sale

  • Net Sale Proceeds: $5,000,000
  • Top Capital Gains Rate:  20%
  • Medicare Surcharge:  3.8%
  • State Tax:  5%

  • Total Tax Rate:  28.8%
  • Approximate Tax Due:  $1,440,000
  • Approximate Net Funds After Sale: $3,560,000

Deferred Sales Trust

  • Net Sale Proceeds: $5,000,000
  • Top Capital Gains Rate:  0%
  • Medicare Surcharge:  0%
  • State Tax:  0%

  • Total Tax Rate:  0%
  • Approximate Tax Due:  $0
  • Approximate Funds After Sale Net of Legal Fee: $4,935,000

By using the Deferred Sales Trust, Samuel can spread out his payments & taxes from the sale into his lower income years, while investing the extra approximate $1.375mm in deferred taxes.

Doing so brings some of the following benefits for Samuel:

  • Reduce his federal capital gains rate to 15% or less
  • Avoid the extra 3.8% Medicare Surcharge Tax 
  • Diversify his income stream
  • Invest for growth & income with approximately $4.935mm vs $3.56mm

Does the Deferred Sales Trust Make Sense For You?

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How Can I SUPER SIZE My Annual Tax Deductions?

Think pensions are only for old, massive companies? Think again.

Individual pension plans can unleash huge tax savings each year for high-earning solo business owners (or those with no W2 employees). Here is a quick illustration to show the massive savings potential through a pension plan.

Meet Susan, who is a doctor, single, and operates through an S-Corp.

  • Age: 52
  • W2 Income: $290,000

Retirement Plan Comparison

Annual Savings Limits*

Annual Tax Savings*

*Based on 2021 contribution limits, included age 50+ catchup for 401k. Tax savings are estimated based on an estimated 35% marginal federal tax bracket. Your individual situation may vary from the illustration above.

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Retirement Plans - Why Would I Set One Up?

This is a common question I hear, and as a business owner myself I get it!

Funding retirement accounts is another form of "paying yourself" first. These accounts grow over time and can serve as a "parachute" to help keep you out of a hard place in the event the business doesn't sell for as much as you hoped in later years. 

At a certain point, diversifying out of a single business is also a good idea. Retirement plans help you keep more of your money and reduce your tax bill year over year. Sounds like a win-win to me!

These tax benefits tied to retirement accounts are what I call "use it, or lose it." So, if you don't take advantage of that available tax-advantaged bucket each year, the tax benefit for every missed year is lost forever. Not to mention lost market growth!

I know business retirement plans and can walk you through the process of finding the best one for you and your business.


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