Jacobo Taurel

For many South Florida families with roots across Latin America, financial decisions carry more than numbers. They involve family expectations, business relationships, and multiple generations. In addition, conversations may move naturally between Spanish and English. When an advisor does not understand those details, even technically sound advice can be difficult to evaluate or act on. Therefore, some families look for bilingual wealth management spanish english to help them take a more active part in their planning.

Talk with Activest about your family’s wealth-management needs.

For an independent wealth manager, the work begins by listening carefully to how a family makes decisions and what it wants to preserve. In other words, language is not merely a convenience. It can shape understanding, trust, and participation across the family.

How Bilingual Wealth Management Spanish English Supports Families

Language does more than translate financial terms. It shapes how clearly a family can describe its priorities and ask difficult questions. It also affects participation in decisions that may affect several generations. For instance, some families move between Spanish and English. For them, the most precise language can reveal context that might otherwise go unstated.

Clarity can create better conversations

An investor profile is useful only when it reflects the client’s actual circumstances. Activest describes this profile as the foundation of its financial-planning relationship. In practice, that process requires more than collecting account balances. It means understanding how a family defines risk and what responsibilities it has to relatives. It also means identifying which goals should guide its financial decisions.

When clients can discuss those subjects comfortably, an advisor may spend less time interpreting basic meaning. Instead, the conversation can focus on the implications. Questions about liquidity, concentrated wealth, family support, or long-term priorities deserve careful answers. Above all, every decision-maker should understand those answers. Wealth management and personalized financial planning should make complex matters clearer. It should not make clients feel they must first become fluent in financial jargon.

Language access includes the whole family

Wealth decisions often involve more than the first person who meets the advisor. A spouse, parent, sibling, or next-generation family member may have a different level of comfort with English or Spanish. Including those voices can help families discuss responsibilities and expectations openly. This may matter most when the objective is to preserve wealth and transfer it responsibly over time.

Of course, not all Spanish-speaking families share the same culture, priorities, or financial experience. Effective communication combines language access with curiosity, listening, and respect for each family’s history. Activest’s published team profiles identify Isaac Wakszol and Jacob Taurel as fluent in English and Spanish. In addition, the firm describes its advisory approach as personalized and human.

Trust requires more than bilingual service

Speaking both languages can support trust for families with international relationships or assets. However, it does not resolve legal, tax, investment, or reporting questions by itself. Those matters may require coordination with qualified CPAs, attorneys, and other professionals. Therefore, families can view bilingual communication as one part of a broader advisory relationship. It can help the family understand its options and make informed decisions with the right specialists involved.

Educational disclosure: Activest Wealth Management does not provide legal or tax advice. Consult your CPA or other tax professional regarding your specific situation.

The Complexity of Bilingual Estate and Tax Planning

Language clarity is one part of cross-border coordination. This applies when a family has assets, beneficiaries, or advisers in more than one country. However, it does not replace legal analysis or tax advice. Instead, it helps family members describe what they own and explain their priorities. It can also help them identify unanswered questions and see which professional should address each issue.

Activest lists succession, estate, and tax planning coordination among its family-office services. For example, that coordination can help organize information for the family’s CPA, tax professional, and attorneys. Meanwhile, it can keep the family’s broader financial objectives in view. For a deeper discussion, see this guide to international estate planning coordination.

Why cross-border details need careful review

An estate plan from one country may not govern property held in another. A University of Akron law-journal article addresses this issue. It notes that international estate planning can raise questions about whether a will made in one country controls property in another. It emphasizes the importance of recognizing differences among legal systems. The article also discusses forced-heirship and succession rules in some civil-law countries. As a result, qualified counsel for the relevant jurisdictions should evaluate these issues. Families should not infer the answers from a general online explanation.

A University of Houston Law Center presentation raises a similar point. It explains that wealth transfers may involve the laws of multiple jurisdictions. This can apply to U.S. persons with foreign assets or family abroad, and to foreign persons with U.S. assets. The applicable rules can affect how a family implements a transfer. They can also affect its potential income or transfer-tax treatment. Families may benefit when their advisers share an accurate picture of the people, entities, residences, documents, and assets involved.

Reporting questions are part of the conversation

Government guidance shows why facts matter. According to FinCEN, a U.S. person may have a financial interest in or signature authority over foreign financial accounts. If so, that person generally must file an FBAR. This applies when the aggregate value exceeds the applicable threshold at any time during the calendar year. In addition, the IRS explains that FATCA may require certain taxpayers to report foreign financial assets on Form 8938. That filing is separate from FBAR reporting. Foreign trusts can raise additional income-tax and information-reporting questions. Depending on the facts, these may include Forms 3520, 3520-A, Form 8938, or FBAR considerations. Rules and filing obligations vary. Therefore, readers should coordinate FATCA and FBAR questions with their CPA or tax attorney.

Activest Wealth Management does not provide legal or tax advice. Consult your CPA, tax professional, and qualified attorneys regarding your specific situation. Investment advisory services involve risk, including possible loss of principal.

How Cultural Context Shapes Financial Decisions

Financial decisions rarely happen in isolation. In a multigenerational family, they may reflect expectations about responsibility, privacy, education, or business ownership. Philanthropy and the role of each generation can matter as well. Those expectations can differ within the same family. For instance, relatives may have lived in different countries or built their wealth through different experiences. Of course, recognizing that context does not mean making assumptions about a family’s culture. It means creating enough space for each person to explain what matters to them.

That is particularly important when discussing risk. For example, one family member may view concentrated ownership of a family business as a source of identity and control. In contrast, another may prioritize diversification and liquidity. A productive conversation does not label either preference as correct or incorrect. Instead, it clarifies the tradeoffs, the time horizon, and the responsibilities attached to each decision. Activest describes its family-office work as combining financial expertise and technology to address family-specific goals and challenges. The firm contrasts this with a one-size-fits-all model. Learn more about family governance across borders.

Language can influence that conversation, but translation alone is not enough. Older relatives may prefer to discuss legacy and family obligations in Spanish. Meanwhile, younger members may feel more comfortable reviewing investment concepts in English. A bilingual discussion can help more family members participate directly and ask questions. It may also help identify misunderstandings before they become conflicts. The goal is not to make every relative use the same language or reach the same conclusion. In practice, the goal is to make the decision-making process understandable and respectful.

Where governance fits

Governance gives those conversations a durable structure. First, families can establish who participates in major decisions. Next, they can decide how members share information and how the family handles disagreements. This structure may help when a family coordinates several investment accounts, monitors external managers, or plans for a family-owned business. Activest identifies account consolidation, external-manager monitoring, and family-business strategic planning among its family-office services. These functions can help a family evaluate whether its financial arrangements still support its stated objectives and legacy.

Examples in this section are educational and are not individualized investment, legal, or tax advice. Families should consult their own qualified advisers, including a CPA or attorney, about their specific circumstances.

What to Look for in a Bilingual Wealth Manager

Fluency is a starting point, not the full qualification. In our view, a strong bilingual wealth manager should be able to discuss investments, family priorities, risk, and long-term planning. The advisor should use the language each participant understands best. Just as important, the advisor should know when a question requires coordination with a CPA, attorney, or another specialist.

First, when evaluating bilingual wealth management spanish english, ask how the firm structures the relationship. Activest says its planning process starts with a detailed investor profile that guides the financial planning relationship. That profile should reflect more than account balances. For example, it should capture family responsibilities, business interests, liquidity needs, and time horizons. It should also capture the decisions that matter across generations.

Questions about process and independence

The quality of the operating process matters as much as the conversation. Activest describes using technology and financial expertise to address family-specific goals. In addition, the firm describes consolidating multiple investment accounts and monitoring external investment managers for alignment with stated objectives. Next, ask what information the team reviews and how often it communicates. Finally, ask who is responsible for keeping the overall picture current.

It is also reasonable to ask how the firm’s independence affects advice. The firm should explain an independent fiduciary relationship directly, including what it does and does not do. You can learn more about wealth management and personalized financial planning and independent fiduciary wealth advice before an introductory conversation.

Disclosure: Activest Wealth Management does not provide legal or tax advice. Consult your CPA or other tax professional regarding your specific situation. Investment values can fluctuate, and loss of principal is possible.

Why Some Latin American Families in South Florida Choose a Bilingual RIA

Planning may involve more than investments. Consider a hypothetical Latin American family in Aventura or elsewhere in South Florida. The parents may prefer to discuss important matters in Spanish, while the children may be more comfortable in English. Other relatives may hold priorities shaped in different countries. In that setting, bilingual wealth management spanish english can give each generation a clearer opportunity to participate. It should not, however, reduce the family’s experience to a language label.

That distinction matters. Speaking Spanish and English is useful. Of course, effective advice also requires listening carefully to how a family defines responsibility, privacy, independence, and legacy. An advisor should make room for those perspectives. At the same time, the advisor should keep the conversation precise, documented, and focused on the family’s actual objectives. Activest describes its advisory approach as personalized and human, and identifies team members fluent in English and Spanish. Learn more about Activest’s family-office approach and how the firm built it around complex family needs.

Community roots and fiduciary independence

South Florida’s appeal to Latin American families is not only geographic. It can be a place where business, family, and community relationships continue across generations. A firm with roots in the local community may understand why continuity and trust matter. Meanwhile, an independent fiduciary structure can help keep the relationship centered on the client’s interests rather than a proprietary product agenda. However, independent advisers still have potential conflicts, such as fees, which the firm discloses in its Form ADV. In our view, that combination may give families a stronger foundation for asking difficult questions and making decisions together.

For some families, the need extends beyond portfolio management. Activest positions its family-office services around personalized, transparent support. The firm combines financial expertise and technology to address family-specific goals and challenges. For example, the work may include coordinating wealth management with portfolio consolidation and family-business planning. It may also involve estate, succession, and tax-planning considerations. In addition, it can help simplify complex matters so family members have a clearer basis for informed decisions.

Activest intends these services to support coordination, not to replace the family’s legal or tax professionals. Individual circumstances require advice from a qualified CPA, attorney, or other appropriate professional. Any investment decision involves risk, including possible loss of principal.

Frequently Asked Questions

Does bilingual wealth management mean an advisor speaks both Spanish and English?

It should mean more than translating financial terms. In practice, a strong relationship supports clear conversations in the family’s preferred language and confirms understanding. It also respects differences in family structure, experience, and decision-making. Ask how language access works in meetings, documents, and communication with relatives.

Why does language matter when managing a family’s wealth?

Precise communication can help families explain priorities and understand investment tradeoffs. It can also include relatives who may be more comfortable in Spanish or English. In addition, it may make it easier to build a complete investor profile, which guides financial planning. However, language access does not replace technical expertise or fiduciary responsibility.

Can a wealth manager replace my CPA or attorney?

No. A wealth manager can coordinate financial planning with your CPA and attorney and organize relevant information. It can also help align investment and succession discussions. However, Activest does not provide legal or tax advice. Consult your CPA, tax professional, or attorney about your specific situation.

What should a cross-border family ask a bilingual wealth manager?

Ask how the advisor coordinates accounts, outside investment managers, family members, and professional advisors across countries. Next, ask about fiduciary responsibility, confidentiality, and reporting. Finally, ask how the advisor reflects your family’s goals in its recommendations. An advisor should not assume every Latin American family shares one language or culture.

How can families evaluate whether an advisor is truly independent?

Ask how the firm earns its compensation and whether it has an affiliation with a broker-dealer. In addition, ask how it manages conflicts of interest. Confirm that the advisor can explain its fiduciary obligations in plain language. The advisor should also coordinate with your existing professionals rather than presenting itself as a substitute for them.

Contact us to discuss your family’s needs

Clear communication can help families approach wealth decisions with greater confidence. It can help across languages, generations, and professional relationships. Contact Activest for a conversation about bilingual wealth management spanish english and family-office coordination. We can also discuss cross-border family needs. Contact Activest to get started. Activest can coordinate with your existing CPA or attorney. However, this article is not legal or tax advice.

IMPORTANT INFORMATION: Activest Wealth Management (“Activest”) is a registered investment adviser with the SEC. Being registered with the SEC does not mean the SEC endorses Activest. No information on this material should be construed as a recommendation regarding the purchase or sale of any security unless specifically stated otherwise. Any summaries, prices, quotes, or statistical information have been obtained from sources believed reliable but are not necessarily complete and cannot be guaranteed. Past performance is not indicative of future results. The value of an investment is subject to risk, including possible loss of the principal invested. Please refer to Activest’s ADV Part 2 for additional information and risks.

For Latin American families with U.S. tax obligations, an investment held through a foreign fund or company can create reporting questions. However, these questions are easy to miss during ordinary portfolio reviews. This educational guide covers PFIC passive foreign investment company Latin American investors topics in plain terms.

The challenge is not simply where an investment sits. Instead, its legal structure, ownership chain, income, and assets may affect how U.S. tax rules apply.

Talk with Activest about coordinating your cross-border wealth-management records.

A careful review begins with the definition of a PFIC and the tests that identify one. From there, investors can see why coordinated cross-border wealth management for Latin American families matters. In practice, investment records and professional advice often span more than one country.

What Is a PFIC?

A passive foreign investment company, or PFIC, is a classification under U.S. tax law for certain foreign corporations. The classification depends on the corporation’s income and assets. In other words, the country of incorporation does not decide the question on its own. Neither does the investor’s nationality or whether the investment appears conservative. For Latin American investors with U.S. tax obligations, the definition is an important first step. It supports a review of foreign-domiciled funds, investment vehicles, and other holdings with a qualified tax professional.

The income test

The income test looks at a foreign corporation’s gross income for the tax year. Under this test, a foreign corporation generally meets the PFIC definition when 75% or more of that income is passive. Passive income can include interest, dividends, rents, royalties, and certain gains. However, the statutory rules and exceptions require careful analysis. As a result, it is not enough to assume that an operating company is outside the rules. Likewise, a foreign-domiciled investment product is not automatically a PFIC.

The asset test

A foreign corporation can also be a PFIC when at least 50% of its average assets produce passive income. The same applies to assets that the corporation holds to produce passive income. The asset test therefore considers how the corporation positions its balance sheet during the year.

Valuation methods and other technical details can matter. For example, the IRS instructions address fair market value for publicly traded foreign corporations. They also provide specific rules for certain non-publicly traded corporations. Confirm the applicable method with a CPA or other tax professional.

Why ownership structure matters

The analysis may not stop with the entity that appears on an account statement. The PFIC look-through rule addresses this layering. Under that rule, the IRS treats a foreign corporation as owning its proportionate share of another corporation’s assets and income. The rule applies when the foreign corporation owns at least 25% of the other corporation’s stock by value.

An ownership chain can therefore affect the PFIC analysis. Meanwhile, the underlying activity may not be immediately visible to an investor.

The IRS explains these tests and the related rules in its Form 8621 instructions. A PFIC determination is fact-specific. For instance, it may involve entity documents, financial statements, ownership percentages, and the investor’s U.S. tax status. This section is general education, not legal or tax advice. Activest does not determine an individual’s PFIC status or tax treatment. Of course, consult a qualified CPA or tax professional before making reporting, investment, or election decisions.

Important risk note: Foreign investments may involve complex reporting requirements, valuation questions, currency considerations, and potential tax consequences. The value of an investment can decline, including loss of principal. Past performance is not indicative of future results.

Why Latin American Investors May Encounter PFICs

For a Latin American investor who becomes a U.S. person for tax purposes, PFIC exposure can arise from older investments. Many of these holdings predate a move to the United States. For example, consider a home-country brokerage account, a foreign-domiciled mutual fund, or an inherited investment. A portfolio assembled for local retirement or savings goals may also require a closer review once U.S. reporting rules apply. The investment may still fit the family’s goals. However, its U.S. tax classification and reporting requirements may differ from the treatment it receives in its country of origin.

That does not mean every foreign account or foreign fund is a PFIC. Instead, specific U.S. rules determine PFIC status for a foreign corporation. The analysis depends on the investment’s legal structure, income, assets, and ownership. In addition, it depends on the investor’s circumstances. The IRS states that a U.S. person who holds PFIC shares directly or indirectly generally may have Form 8621 obligations. These situations include certain distributions, dispositions, elections, or annual reporting requirements. See the IRS Form 8621 instructions for the governing framework.

Common sources of potential exposure

• Foreign-domiciled funds: A mutual fund, exchange-traded fund, or similar pooled investment organized outside the United States may need PFIC review. Investors should not assume it receives the same treatment as a U.S.-domiciled fund.
• Home-country investment accounts: An account opened while the family lived in Latin America may contain individual securities, pooled vehicles, or ownership interests. Their U.S. classification may not be obvious from a statement alone.
• Inherited or legacy holdings: Assets received from a parent, family trust, or earlier investment plan can remain in a portfolio after a change in residence. In practice, ownership history and acquisition dates may matter when a CPA evaluates reporting and tax treatment.
• Pre-immigration portfolios: Investments held before moving to the United States may deserve review before or around the start of U.S. tax residency. This step matters most when records are incomplete or the portfolio includes products unfamiliar to U.S. advisers.

Where coordination fits

Cross-border planning is therefore a coordination exercise, not simply a search for a prohibited investment. For PFIC passive foreign investment company Latin American investors questions, the facts often sit in several places. As a result, families may need to connect account statements, fund documents, ownership records, residency dates, and prior tax filings. That way, their professional advisers can evaluate the facts together. Our guide to cross-border wealth management for Latin American families explains why that coordination matters. It covers investments, reporting, estate planning, and professional relationships.

Explore coordinated wealth management for complex family finances.

Families considering a move can also review pre-immigration tax planning for Latin Americans as an educational starting point. Before selling, transferring, or retaining a foreign investment, consult a qualified CPA or other tax professional about your specific facts. Activest can help organize investment information and coordinate with a family’s tax and legal advisers. However, this article is general education, not individualized tax or legal advice.

PFIC Passive Foreign Investment Company Latin American Investors: How U.S. Rules Apply

For a U.S. person who owns shares of a passive foreign investment company, the U.S. tax analysis generally involves reporting. It also involves one of several potential treatment pathways. The Internal Revenue Service describes Form 8621 as an information return for a shareholder of a PFIC or qualified electing fund. For example, a filing requirement may arise after certain distributions or a disposition that produces gain. It may also arise from a QEF or mark-to-market election or an annual report requirement under Section 1298(f). In addition, a separate form generally applies to each PFIC held directly or indirectly, including relevant ownership chains. See the IRS Form 8621 overview and Form 8621 instructions.

Why Section 1291 treatment can be complex

When the rules treat a PFIC as a Section 1291 fund, excess distributions become a central concept. In general, an excess distribution is the part of a current-year distribution that exceeds 125% of a benchmark. That benchmark is the average of distributions received during the preceding three tax years. If the shareholder’s holding period is shorter, the shorter period applies instead. The rules also treat the entire gain from disposing of a Section 1291 fund as an excess distribution. Next, the rules allocate the excess amount across the shareholder’s holding-period days. Portions assigned to the current year and pre-PFIC years generally count as ordinary income. In contrast, portions allocated to prior PFIC years generally carry a separate tax and interest charge. Therefore, the holding period and the fund’s historical records can matter.

How to read the treatment pathways

The rules do not produce a single result for every investor or every foreign fund. Instead, the applicable treatment depends on facts such as the investment, ownership structure, and available fund information. Elections and the shareholder’s tax history matter as well. The following table is a high-level comparison, not a recommendation.

For Latin American investors, records may span multiple custodians, currencies, entities, and jurisdictions. As a result, the factual work can grow complicated even before a tax professional evaluates the rules. A coordinated review of statements, ownership records, fund documentation, and prior filings can help the investor’s CPA or tax adviser. In particular, it can clarify what information the adviser needs. Activest can support investment oversight and record coordination. However, it does not provide individualized legal or tax advice.

A Practical Review Process for PFIC Exposure

A careful review is usually more useful than interpreting one statement or fund name in isolation. The objective is a reliable record for the qualified CPA or tax professional. That professional determines whether U.S. reporting, an election, or other treatment applies. Use the following process as an educational framework for PFIC passive foreign investment company Latin American investors reviews. It is not a filing checklist or personal tax advice.

Start with the inventory and records

1. First, identify every account and potential holder. Begin with a complete inventory of taxable brokerage accounts, retirement arrangements, and insurance-linked investments. Include family entities, trusts, and legacy accounts in the United States and abroad. Note who owns each account, who has beneficial ownership, and whether a family member or entity may hold an investment indirectly. A U.S. person who is a direct or indirect PFIC shareholder may have Form 8621 obligations in specified circumstances. Therefore, the review should not stop at accounts held in the investor’s own name. The IRS Form 8621 instructions describe the relevant circumstances.
2. Next, collect statements and ownership records. Gather year-end and transaction statements, fund prospectuses or annual reports, and purchase and sale confirmations. Also collect distribution records, cost-basis information, and documents showing entity or trust ownership. Preserve records from the full holding period when available. This matters because the IRS states that a separate Form 8621 generally applies to each PFIC held directly or indirectly. That includes each PFIC in an ownership chain. Missing historical records can make the CPA’s analysis more difficult.
3. In addition, map direct and indirect exposure. Create a simple ownership map from each account or entity to the underlying fund, company, or pooled investment. Do not assume that every foreign-domiciled fund is a PFIC. Likewise, a familiar investment label does not resolve the question. The map should identify possible ownership chains. It should also distinguish an investment’s legal issuer, domicile, and account owner. The family can also review it alongside broader foreign asset reporting for Latin American families. Of course, PFIC analysis and other foreign-asset reporting requirements are not interchangeable.

Bring the tax professional and advisers together

4. After that, ask the CPA focused questions about Form 8621 and elections. Provide the inventory and supporting records to a qualified CPA or tax professional. Ask whether the facts create a Form 8621 filing circumstance and whether separate forms may apply. Also ask whether the professional needs to evaluate a QEF or section 1296 mark-to-market election. The IRS instructions identify several potential circumstances. These include distributions, dispositions, QEF or mark-to-market reporting, Part II elections, and certain annual reporting. Election availability and timing depend on the facts. As a result, do not make or backdate an election based on a general article.
5. Finally, coordinate adviser records and decisions. Once the tax professional identifies the relevant questions, confirm that each adviser works from the same holdings and transaction history. That group may include the investment adviser, custodian, CPA, attorney, and other appropriate professionals. Coordinated wealth management can help organize portfolio records and investment oversight. However, Activest does not provide individualized legal or tax advice. The CPA remains responsible for tax advice and filing positions.

How Cross-Border Wealth Management Can Support Coordination

PFIC passive foreign investment company Latin American investors questions rarely exist in isolation. For example, a family may hold accounts, companies, funds, and securities across more than one country. Meanwhile, its investment adviser, CPA, and attorney may each see only part of the picture. Coordinated wealth management can help organize the information those professionals need. Of course, it does not replace their distinct responsibilities.

Build a reliable record of the family’s holdings

A useful starting point is a consolidated inventory of accounts, entities, custodians, managers, currencies, ownership interests, and relevant statements. This record can help show an investment’s domicile and who owns it directly or indirectly. In addition, it can show which documents a CPA may need to evaluate potential U.S. reporting. It can also help distinguish current holdings from inherited, closed, or transferred positions.

Portfolio reconciliation adds another layer of discipline. Comparing custodian statements, manager reports, and internal records may reveal missing data or inconsistent valuations. It may also surface duplicate positions or transactions that need clarification. That process does not determine whether an investment is a PFIC or select a tax election. Instead, it gives the family and its qualified tax professionals a clearer factual record to analyze.

Coordinate investment and professional-adviser decisions

Investment-manager analysis can place a foreign-domiciled holding within the broader portfolio context. For instance, questions may include its purpose, liquidity, concentration, currency exposure, fees, and risk. Its relationship to the family’s objectives also matters. Any decision to retain, restructure, or sell an investment should consider investment, legal, and tax consequences. Above all, a CPA or other qualified tax professional must determine the appropriate tax treatment. That includes whether Form 8621 or an election may apply.

For families with U.S. and Latin American connections, coordinated wealth management can support communication among the family, adviser, CPA, and attorney. Activest can also help coordinate with outside professionals. However, it does not prepare tax returns, provide legal advice, or determine PFIC treatment.

Keep risk and responsibility visible

Coordination can reduce avoidable information gaps. However, it cannot eliminate market, currency, liquidity, investment, legal, or tax risk. A family-office relationship may provide broader oversight through family-office support, including reconciliation and investment-manager analysis. Meanwhile, each professional remains responsible for advice within their expertise. Rules can change, and outcomes depend on facts and circumstances. Therefore, consult a qualified CPA or tax professional about your situation before acting.

IMPORTANT INFORMATION: Activest Wealth Management (“Activest”) is a registered investment adviser with the SEC. Being registered with the SEC does not mean the SEC endorses Activest. No information on this material should be construed as a recommendation regarding the purchase or sale of any security unless specifically stated otherwise. Any summaries, prices, quotes, or statistical information have been obtained from sources believed reliable but are not necessarily complete and cannot be guaranteed. Past performance is not indicative of future results. The value of an investment is subject to risk, including possible loss of the principal invested. Please refer to Activest’s ADV Part 2 for additional information and risks.

Frequently Asked Questions

What is a PFIC passive foreign investment company?

A PFIC is a foreign corporation that meets either the income test or the asset test. Generally, a corporation meets the income test when at least 75% of its gross income is passive. In contrast, it meets the asset test when at least 50% of its average assets produce passive income. The asset test also counts assets that the corporation holds to produce passive income. The IRS explains both tests in its Form 8621 instructions.

Who do PFIC rules apply to?

They can apply to a U.S. person who directly or indirectly owns shares in a PFIC. For example, ownership may run through an investment account, fund, or ownership chain. Depending on the facts, Form 8621 may apply to distributions, a disposition, or certain elections. It may also apply to an annual section 1298(f) report. The IRS generally requires a separate form for each PFIC held directly or indirectly. Therefore, a CPA should review the full ownership structure.

How can an investor avoid PFIC status?

An investor cannot change whether a foreign corporation meets the PFIC tests simply by relabeling the investment. In practice, the process starts with identifying each foreign fund or company. Next, the investor can confirm its classification with qualified tax professionals. Finally, the investor can assess alternatives before investing or becoming a U.S. tax resident. Do not sell, transfer, or elect a tax treatment based on general information alone. The appropriate approach depends on the investment, holding period, account structure, and applicable tax rules.

Is it better to invest in a PFIC or not?

There is no universal answer. A PFIC may fit an investor’s objectives. However, its reporting and tax treatment can add complexity. Possible pathways include a qualified electing fund election or a mark-to-market election for eligible marketable stock. Each option carries specific requirements under the IRS instructions. Discuss the investment decision and any election with a qualified CPA or tax professional. Then coordinate the conclusion with your investment adviser.

Get started with coordinated cross-border support

PFIC questions often involve investment records, ownership details, and communication between your wealth adviser and tax professional. Activest can help organize the wealth-management side of that conversation. Of course, it does not provide individualized tax or legal advice. Consult your CPA or qualified tax professional about your specific reporting and tax questions. To discuss how Activest can support coordinated records and communication, contact Activest.

When a family business expands from Latin America into the United States, succession becomes more than a leadership question. Families researching “succession planning latin american family business us” usually want to align ownership, decision-making authority, and family expectations. In addition, they need operating responsibilities and professional advice that work across borders while the business keeps serving customers.

Explore cross-border succession planning

In short, the answer is a coordinated process for preparing leadership and ownership transitions. It also involves reviewing governance and connecting business decisions with estate and wealth planning. The right framework depends on the family’s circumstances, entities, jurisdictions, and goals. Therefore, families should develop it with qualified attorneys and CPAs.

That process begins with a clear definition of succession itself. Looking beyond a change in job title helps families examine the continuity of leadership, ownership, and stewardship. It also brings the relationships that support the enterprise into view.

What Is Business Succession Planning?

Business succession planning is the deliberate process of preparing for continuity when leadership, ownership, or decision-making responsibility changes. However, it is broader than naming a replacement for a founder. For a family enterprise, a durable plan considers who will lead the operating business and how ownership may pass to others. It also considers family governance and the stewardship of wealth over time.

A Kellogg family-enterprise paper describes continuity as extending from leadership to ownership to stewardship of wealth. That framing matters for Latin American families with U.S. operations. In practice, a business transition can affect both the enterprise and the family’s broader financial relationships. As a result, the right questions go beyond who becomes chief executive. They also include who has authority to make strategic decisions and how shareholders will work together. Finally, families can ask how they will carry forward their values and responsibilities.

Four connected areas of continuity

• Leadership: identifying the capabilities, experience, and preparation that future operating leaders need.
• Ownership: evaluating how shares or other ownership interests may change hands and how co-shareholders will make decisions.
• Governance: clarifying decision rights, accountability, family participation, and processes for resolving disagreement.
• Wealth stewardship: considering how the family will manage business value, liquidity, and shared objectives across generations.

The University of Washington article on family-business transitions lists several matters that may arise in transition design. For example, it names timing, valuation, life-insurance structuring, entity options, compensation, and co-shareholder planning. It also emphasizes that alternative transition strategies and restructuring options have comparative benefits and inherent limitations. In other words, those observations support a coordinated review, not a one-size-fits-all formula.

Risk and compliance note: Succession decisions can involve legal, tax, valuation, ownership, and family-governance risks. This section is educational and is not legal or tax advice. Families should consult qualified attorneys and CPAs or other tax professionals about their specific facts, jurisdictions, documents, and obligations.

For families operating across the United States and Latin America, planning early can create space to compare options. Meanwhile, it gives families time to involve the appropriate professionals before a transition becomes urgent.

Succession Planning Latin American Family Business US: Why Borders Matter

An operating family business carries more than financial value. It also carries decision rights, employment relationships, leadership expectations, and a history that may span generations. Some relatives may live in different countries while the business operates in the United States. In that case, a transition must preserve day-to-day continuity. It must also make ownership and authority understandable to everyone involved.

For anyone studying succession planning latin american family business us questions, family dynamics are part of the operating environment. For example, a founder may expect a child to lead because of family role. Other relatives may expect leadership to follow experience, preparation, or an independent assessment. Family members may also hold different views about reinvesting profits or distributing value. Others may disagree about bringing in non-family executives or retaining control. Of course, these are governance questions, not merely personal disagreements. Therefore, the family should address them before a triggering event forces a decision under pressure.

Where multiple jurisdictions fit

Multiple jurisdictions add another layer. The Chambers Mexico guide notes that cross-border family ties can create conflicts. Those conflicts can arise when jurisdictions recognize family relationships differently, as described in the guide’s discussion of cross-border family relationships. In addition, a separate cross-border succession analysis addresses business interests held in several countries. It explains that each country may apply its own probate or succession process and rules. It also discusses forced-heirship regimes in many civil-law countries. In those systems, mandatory shares may affect how the family implements a founder’s wishes. However, those observations are planning considerations, not conclusions about any particular family’s legal position.

For this reason, the family should map more than the company chart. First, the process should identify who owns each interest and who has authority to make operating decisions. Next, it should identify which relatives expect to participate. It should also name the attorneys and CPAs who must coordinate across jurisdictions. Finally, the family should decide how the business continues if a founder becomes unavailable or a shareholder disagrees. The same planning should cover a document that another country does not recognize as expected.

Why a structured approach helps

A bibliometric study describes succession planning as a critical and challenging issue for family businesses. The same study describes a structured approach as potentially supporting long-term viability. It may also help prevent operational disruption and family conflict. However, a structured approach does not guarantee a successful transition. Read the study’s discussion of succession planning and continuity.

Families may benefit from coordinating these conversations through family business succession planning support. Meanwhile, legal and tax professionals can address the questions within their respective practices.

Risk and disclosure: Cross-border succession outcomes depend on facts such as residence, citizenship, entity ownership, and asset location. Governing documents and the applicable laws also matter. This section is educational and does not provide legal or tax advice. Consult qualified attorneys and CPAs before changing ownership, governance, or estate arrangements. Activest Wealth Management does not guarantee any particular continuity, tax result, or family outcome.

How Can Families Structure Ownership and Governance Across Borders?

No single ownership or governance model fits every family business with U.S. and Latin American interests. Instead, the useful starting point is a coordinated set of questions. First, who owns which assets, and who can make operating decisions? Next, how will the family resolve disagreements? In addition, what happens when a founder dies, becomes incapacitated, or wants to step back? The University of Washington identifies timing, entity options, valuation, and co-shareholder planning as related transition considerations. It also notes that alternative strategies have different benefits and limitations. Read the academic discussion of transition planning.

Families may need to decide whether to hold the operating business, investments, and residences together or in separate entities. A shareholder agreement can address voting, transfers, buy-sell events, and deadlock. Meanwhile, a family constitution can document shared values, participation expectations, and decision-making practices. However, it does not replace enforceable legal documents. Trusts and boards may also be relevant, depending on the family, assets, and jurisdictions involved. In practice, the family should evaluate them as parts of one plan, not select them in isolation.

How to read the coordination table

The table below summarizes questions that may arise in succession planning latin american family business us discussions. It is illustrative, not exhaustive.

Jurisdictions may recognize cross-border family relationships differently, and the applicable rules can vary by location. For example, Chambers notes that cross-border ties can create recognition conflicts. In addition, a cross-border succession guide cautions that interests in multiple countries may lead to separate succession or probate processes. As a result, these observations support careful coordination, not a predetermined structure. See the Chambers cross-border family-law discussion and review other guidance with your own advisers.

Risk and compliance note: Legal, tax, reporting, and estate outcomes depend on facts such as residence, citizenship, asset location, entity type, and governing law. This section is educational, not individualized legal or tax advice. Consult qualified attorneys and CPAs in each relevant jurisdiction before changing ownership, governance documents, or fiduciary arrangements.

What Should Families Review in Estate and Tax Planning?

Estate and tax planning for a family business should begin with a coordinated inventory, not a single document. The goal is to give the family’s attorney, CPA, and wealth adviser a shared view of the relevant facts. For instance, that view can cover ownership, liquidity, governance, and the transfer of responsibilities. Of course, the right questions will depend on each family’s facts and the jurisdictions involved.

Start with residence, citizenship, and family relationships

Document where key family members live and their citizenship or tax-residence status. In addition, note where the law recognizes important family relationships. Some families have relatives, owners, or heirs in both the United States and Latin America. Those families may need professionals to compare how these facts interact. Jurisdictions can recognize cross-border relationships differently. Therefore, assumptions based on one country’s documents may not answer every planning question.

Map assets, entities, and ownership

Create a current inventory of the operating business, investment accounts, real estate, and insurance. Next, add interests in holding companies and other material assets. For each item, identify its location, legal owner, and beneficial owner where relevant. Also list the documents that govern its transfer. The review should also examine shareholder arrangements, voting rights, guarantees, and any entity structure connected to the business. The University of Washington’s transition-planning discussion flags timing, entity options, and co-shareholder planning for careful evaluation. However, it also notes that transition strategies have different benefits and limitations.

Do not assume that a structure used by another family will produce the same result. For example, one cross-border planning source cautions that family limited partnerships face significant IRS scrutiny in the United States. It adds that their usefulness depends heavily on jurisdiction. In other words, the point calls for professional analysis, not a recommendation to use or avoid a particular structure.

Test liquidity and coordinate the review

Ask how the family could fund estate obligations, business debt, taxes, and buyouts. In addition, consider equalization among heirs and ongoing family expenses. The aim is to avoid a rushed sale or unplanned transfer of business interests. Next, have the attorney and CPA review the relevant documents and assumptions together. They can then compare those findings with the family’s broader financial plan. Activest’s wealth and estate planning services exist to support this coordination in succession planning latin american family business us matters. However, the firm’s role remains distinct from legal and tax advice.

Planning and risk disclosure: This section is educational and is not legal, tax, accounting, or investment advice. Estate and tax treatment can change with residence, citizenship, asset location, entity ownership, and changes in law. Families should consult qualified attorneys and CPAs about their individual circumstances. No structure or planning approach guarantees a particular tax result, transfer outcome, or protection from loss.

A Practical Timeline for Family Business Succession

Families can coordinate a cross-border transition more easily by treating it as a process, not a single signing date. For some families, a five-to-ten-year horizon can give time to prepare, compare options, and coordinate advisers. The following is an illustrative framework for succession planning latin american family business us decisions, not a universal timetable. Of course, the right pace depends on the family, the operating business, and its ownership structure. Jurisdictions and the readiness of potential successors also matter.

1. First, five to ten years before transfer: define the destination. Clarify what continuity means for the family and the enterprise. Identify possible leadership successors, decision rights, and ownership goals. In addition, define the role of family members who will not work in the business. Begin a governance framework, such as a family constitution or family council, if those tools fit the family’s circumstances. An early governance conversation can give family members time to clarify expectations before a transfer becomes urgent.
2. Next, five to seven years before transfer: review ownership. Work with qualified legal and tax professionals to examine the current ownership structure. Together, consider whether a holding company, trust, foundation, or another arrangement is appropriate. One cross-border planning guide places this review in the five-to-seven-year window. However, families should treat it as a professional review, not as a recommendation to adopt any particular structure.

Later stages of the transition

3. In addition, two to five years before transfer: develop the next generation’s role. Consider whether and how voting or non-voting interests may transition. Meanwhile, give successors meaningful preparation for leadership and stewardship. Build decision-making routines and clarify accountability. Then test how the business will operate if authority shifts gradually rather than all at once.
4. After that, one to two years before transfer: review documents and readiness. Recheck agreements, governance records, ownership documents, estate plans, and operating authorities with the family’s attorneys and CPAs. Confirm that documents reflect current family relationships, residences, assets, and business realities across jurisdictions.
5. Finally, at transfer and afterward: monitor the transition. Keep communication structured and revisit the plan as circumstances change. Family disagreement, operational disruption, and changes in legal or tax rules can affect timing or implementation. Academic research suggests a structured approach may help reduce the risk of disruption and family conflict. However, no plan can eliminate those risks. Families should obtain individualized legal and tax advice from qualified professionals before acting.

In other words, a timeline creates room for informed conversations, preparation, and course correction. It should support the family’s goals without assuming that every business, jurisdiction, or generation will follow the same path.

How a Family Office Coordinates Business Succession Across Borders

Some family businesses have operations, owners, or beneficiaries in more than one country. For them, succession planning is not only a question of who will lead next. It also requires a shared process for organizing information and clarifying responsibilities. Above all, it requires keeping the right professionals aligned.

A family office can help create that coordination layer. For example, Activest’s family-office offering includes family business succession planning and family-business and strategic planning. It also includes estate, succession, and tax planning intended to support wealth transfer to future generations. Of course, the role is not to replace the family’s attorney or CPA. Instead, it helps the family see how business strategy, personal wealth, estate objectives, and cross-border considerations fit together.

Build one coordinated view of the transition

In our view, effective coordination starts with communication. Family members, business leaders, and advisers need a consistent understanding of the proposed transition. In addition, they need clarity on the decisions still open and the documents or analysis required before moving forward. Some assets and responsibilities may span jurisdictions. In that case, timely information sharing can help reduce the risk that one adviser works from an incomplete picture.

Reconciliation is another practical part of the process. In practice, organizing and comparing account, ownership, and investment information can give the family a clearer basis for discussion. That discussion can cover liquidity, governance, and the relationship between business and personal wealth. Families can then connect those discussions to their broader wealth and estate planning services needs. However, a financial summary is not a substitute for legal or tax advice.

Coordinate, do not substitute, professional advice

Activest states that it coordinates among service providers and introduces clients to vetted professionals, including attorneys and CPAs. It also states that it does not provide legal or tax advice. That distinction matters. The family office can help organize questions, maintain communication, and support implementation planning. Meanwhile, qualified professionals address jurisdiction-specific legal, tax, and documentation issues.

Families may also find it useful to connect operating-business decisions with family governance and succession. Above all, the objective is a thoughtful, collaborative process that respects the family’s circumstances. It avoids assuming that one structure fits every Latin American family with U.S. ties.

Important: Activest Wealth Management does not provide legal or tax advice. Consult your qualified attorney and CPA or tax professional about your specific circumstances.

Frequently Asked Questions

When should a family begin planning a business succession?

Begin well before the expected transition, while the founder and current leaders can still test assumptions. In addition, that window allows time to develop next-generation capability and coordinate ownership, governance, and estate questions. A five-to-ten-year horizon may be useful for some families. However, the appropriate timeline depends on the family, business, jurisdictions, and readiness of the people involved. This is not individualized legal or tax advice.

Why do U.S. operations make succession planning more complex?

More than one legal system may affect ownership, family relationships, business entities, estate documents, and tax treatment. In addition, jurisdictions may recognize cross-border family relationships differently. Therefore, the planning team should identify those questions early. Qualified attorneys and CPAs can then assess the specific facts. They can confirm whether a document or structure works the same way in each jurisdiction instead of assuming it does.

What should a family review besides choosing the next leader?

A complete review can include leadership responsibilities, ownership rights, shareholder arrangements, and decision-making authority. It can also cover family governance, liquidity needs, and the stewardship of wealth. For example, academic research on family enterprise describes continuity as extending from leadership to ownership and wealth stewardship. The family should also discuss what happens if a proposed successor is unavailable, unwilling, or not prepared to lead.

Can a wealth manager provide legal or tax advice for a cross-border transition?

No. A wealth manager may help organize the planning process, coordinate information, and work alongside the family’s attorneys and CPAs. However, legal and tax conclusions belong with qualified professionals licensed for the relevant jurisdictions. Activest describes its role as coordinating service providers and introducing clients to vetted professionals. Of course, it does not provide legal or tax advice.

Start With a Coordinated Succession Conversation

Succession planning can help family-business owners align leadership, ownership, and communication across the United States and Latin America. For readers comparing approaches to succession planning latin american family business us questions, coordination is a practical first step. In practice, Activest can coordinate the broader planning conversation with your attorneys and CPAs. Meanwhile, each professional’s role stays clear. Activest does not provide legal or tax advice.

Contact Activest to discuss your succession priorities.

IMPORTANT INFORMATION: Activest Wealth Management (“Activest”) is a registered investment adviser with the SEC. Being registered with the SEC does not mean the SEC endorses Activest. No information on this material should be construed as a recommendation regarding the purchase or sale of any security unless specifically stated otherwise. Any summaries, prices, quotes, or statistical information have been obtained from sources believed reliable but are not necessarily complete and cannot be guaranteed. Past performance is not indicative of future results. The value of an investment is subject to risk, including possible loss of the principal invested. Please refer to Activest’s ADV Part 2 for additional information and risks.

Closing a business sale can turn years of concentrated effort into a large, highly visible financial decision. However, the wire transfer is only the beginning. For families deciding what to do with money after selling a business, the first questions are practical. Before choosing investments, they may need to clarify near-term liquidity and confirm what remains owed. In addition, they may need to coordinate with their CPA. Next, they can connect the proceeds to goals such as retirement, legacy, philanthropy, or a next venture.

Explore your post-exit wealth planning with Activest

This guide focuses on decisions after closing, not a pre-sale checklist. Specifically, it explains how to create breathing room and evaluate deployment without rushing. It also shows how to bring fragmented financial details into one coordinated view. Activest’s wealth management through life’s biggest financial events can help families organize that broader conversation. Therefore, the first step is understanding what deserves attention during the initial 90 days.

What to Do With Money After Selling a Business in the First 90 Days

First, protect liquidity and confirm what you actually received. Next, create a coordinated plan before making large, irreversible investments. Sale proceeds may need to support your family, investment strategy, and long-term legacy at the same time. As a result, many families may find the first 90 days more useful for organizing decisions than for deploying capital quickly.

A practical sequence starts with visibility. For example, separate the proceeds you may need for taxes, transaction obligations, near-term spending, or an earn-out. Then keep capital intended for longer-term goals in a distinct category. In addition, review the ownership, account, and jurisdictional details with the professionals responsible for each area. If your family has cross-border obligations, document those early rather than treating them as an afterthought.

For cash held at a bank, the FDIC describes deposit insurance coverage limits. Those limits depend on the depositor and the insured bank. However, that is general information. It is not a recommendation to divide funds or a guarantee that a particular structure is appropriate. Therefore, verify current rules directly with the FDIC and discuss your circumstances with qualified professionals.

How to organize your first review

• First, confirm the proceeds received, outstanding liabilities, and any deferred or contingent amounts.
• Next, identify the cash needed for taxes, spending, family commitments, and near-term opportunities.
• In addition, ask your CPA or tax professional about your specific tax circumstances before acting.
• Then write down the goals and constraints that should guide investment decisions.
• Finally, use post-sale entrepreneur planning as a related resource, while keeping this review focused on decisions after closing.

This educational framework cannot account for your transaction terms, residence, family structure, or risk tolerance. Of course, a measured process can improve coordination, but it cannot eliminate market, tax, or timing risk.

Tax Planning After a Liquidity Event Requires Coordination

A closing statement may not show the amount available for long-term decisions. Understanding that gap is central to deciding what to do with money after selling a business. For example, the deal structure, payment timing, and your residence may affect net proceeds. In addition, estimated payments, earn-outs, installment arrangements, and remaining liabilities can change the result. As a result, treating the full headline purchase price as spendable cash can create avoidable pressure later.

General tax information from the IRS is a useful starting point, but it cannot determine your individual obligations. The tax treatment of a sale depends on the facts of the transaction and the taxpayer. Therefore, your CPA or other tax professional should review the purchase agreement, closing documents, and basis. Next, they can examine the payment schedule, residence, and expected liabilities before you make major decisions with the proceeds.

Question: When should tax planning begin after selling a business?

Answer: Begin as soon as you know the transaction terms. Then update the plan when the sale closes and as additional payments, earn-outs, or liabilities become clearer. Early coordination may give your CPA and planning team time to separate tax reserves from other funds. In other words, the team can identify which funds may remain available for family, investment, or charitable goals.

Coordinate the people and documents

Tax planning rarely stands apart from the rest of a post-exit plan. For instance, a wealth manager may help organize the balance sheet, cash needs, investment decisions, and family objectives. Meanwhile, the CPA handles tax analysis and filings. An attorney may address legal documents, entity matters, or estate planning. Activest coordinates with service providers and can introduce clients to lawyers, brokers, and CPAs that the firm has vetted. However, Activest does not provide legal or tax advice. In practice, this coordination can help keep assumptions consistent across the team.

For additional educational context, review Activest’s tax planning for high earners. Then discuss which concepts, if any, apply to your circumstances with your tax professional.

Risk and disclosure: Tax laws, interpretations, and personal circumstances can change. A strategy that may suit one transaction or family may be unsuitable for another. In addition, no one can guarantee tax outcomes. This section is general educational information, not individualized tax, legal, or investment advice.

How Do You Invest a Large Windfall Without Rushing?

The transition from business owner to portfolio investor deserves a process, not a reaction. Before deciding what to buy, clarify what the proceeds need to accomplish. For example, they may need to support your lifestyle, fund future opportunities, or transfer wealth. They may also support family members or preserve flexibility across jurisdictions. In other words, those objectives shape the questions your plan should answer.

Start with goals, liquidity, and risk capacity

Separate money by purpose and time horizon. For instance, a near-term liquidity tier may cover expected spending, taxes, commitments, and contingencies. A longer-term tier may support retirement, family legacy, philanthropy, or future investments. However, risk capacity is not simply how comfortable you feel when markets rise or fall. It also reflects your obligations, time horizon, income sources, and concentration in other assets. Above all, it reflects your ability to tolerate a loss without changing course at the worst moment.

Liquidity tools can include FDIC-insured accounts, money market funds, or short-term Treasuries while you develop a broader plan. Each has different risks, access terms, and protections. For example, FDIC insurance rules apply to eligible deposits and coverage limits, not to every financial product. Money market funds are not bank deposits and can lose value, and Treasury prices can change before maturity. Therefore, review the details with qualified professionals rather than treating any cash vehicle as guaranteed.

Put the decisions in writing

An investment policy can turn a large, emotional decision into a shared reference point. It may document goals, liquidity needs, time horizons, and risk boundaries. In addition, it may cover decision responsibilities, rebalancing principles, and circumstances that would justify a review. It should also acknowledge what the plan does not attempt to predict. Of course, a written policy cannot eliminate market risk. Instead, it may reduce the chance that urgency, headlines, or an isolated recommendation controls the entire process.

Where staged deployment fits

Staged decisions may provide time to test assumptions and coordinate with your CPA and other advisers. They may also help identify assets or obligations that were not visible during the transaction. However, gradual deployment does not remove market or timing risk, even if it eases pressure to decide everything at once. There is no universally correct schedule or allocation.

For a broader view of goals-based planning and investment coordination, explore Activest wealth management services. The appropriate process depends on your circumstances, and general information is not individualized investment advice.

Question: What should you confirm first when deciding what to do with money after selling a business?

Answer: First, confirm your net liquidity and obligations. Next, define goals and time horizons, establish an appropriate cash process, and document an investment policy before major decisions. In addition, consult your CPA or tax professional about tax matters and qualified advisers about investment risks. Finally, avoid treating a large balance as a reason to rush.

IMPORTANT INFORMATION: Activest Wealth Management (“Activest”) is a registered investment adviser with the SEC. Being registered with the SEC does not mean the SEC endorses Activest. No information on this material should be construed as a recommendation regarding the purchase or sale of any security unless specifically stated otherwise. Any summaries, prices, quotes, or statistical information have been obtained from sources believed reliable but are not necessarily complete and cannot be guaranteed. Past performance is not indicative of future results. The value of an investment is subject to risk, including possible loss of the principal invested. Please refer to Activest’s ADV Part 2 for additional information and risks.

What Does Diversification Look Like After a Business Sale?

After a sale, diversification is less about a predetermined investment mix. Instead, it starts with understanding what your wealth must accomplish. Sale proceeds may need to support near-term spending, family commitments, future opportunities, and long-term legacy goals. A thoughtful process can help reduce dependence on one company, industry, currency, or jurisdiction. However, diversification does not eliminate investment loss or guarantee a positive result. In practice, diversification is one part of deciding what to do with money after selling a business.

1. First, identify ongoing cash needs

   Start with the obligations that cannot wait for favorable market conditions. For example, map expected living expenses, debt payments, taxes, and education costs. Then add charitable commitments, planned purchases, and any remaining business-related liabilities. Separate money needed soon from capital intended for longer-term goals. As a result, you may face less pressure to sell a long-term investment at an unfavorable time. Still, this step cannot remove market or timing risk.

2. Next, map assets and liabilities across jurisdictions

   Build one view of bank accounts, investment accounts, real estate, private interests, insurance, trusts, and liabilities. For families with assets or obligations in more than one country, also identify ownership structures, currencies, and reporting requirements. Likewise, note the professionals responsible for each area. Cross-border wealth planning can help families think through these connections with greater coordination. However, your CPA and legal advisers should address your specific tax and legal circumstances.

3. In addition, define concentration risks

   Review where risk remains concentrated after the transaction. For instance, it may sit in a large cash balance at one institution, a single market, or a familiar sector. It may also sit in one currency, private investments, or property in one location. The purpose is not to eliminate every exposure. Instead, it is to understand which risks are intentional and which came with the sale. In practice, some may also conflict with your family’s time horizon and capacity for loss.

4. Then coordinate family goals

   A sale often changes the financial choices available to several generations. Therefore, discuss how proceeds may support parents, children, philanthropy, succession, or a future family enterprise. Clear priorities can make diversification a family decision rather than a collection of disconnected account decisions.

5. Finally, review the plan periodically

   Income needs, residence, family circumstances, liabilities, and market conditions can change. Accordingly, revisit the map and the assumptions on a defined schedule and after major events. The right review may lead to no immediate action. However, it may also identify a need to rebalance or consolidate information. It may also point to a conversation with your investment, tax, and legal professionals before moving forward.

Why Post-Exit Entrepreneurs May Need Family Office Support

After a business sale, the challenge rarely stops at choosing investments. For example, sale proceeds can affect how families organize accounts and coordinate decisions. They can also affect how the next generation prepares for stewardship. As a result, a family office approach can bring these moving parts into one planning conversation. Of course, not every family needs the same structure.

From a concentrated business asset to a coordinated balance sheet

Entrepreneurs often know their operating company in detail. However, the post-exit picture may now include multiple investment accounts, cash reserves, private interests, and real estate. It may also include insurance and obligations in more than one country. Consolidation and portfolio reconciliation can help clarify what the family holds and where. In addition, they can show how different managers and accounts fit together. Activest describes using in-house reconciliation software to help consolidate and reconcile investment accounts. That visibility can support better questions, although it does not remove investment, liquidity, currency, or market risk.

Coordinating managers, family priorities, and professional advisers

Investment-manager analysis can help a family evaluate whether each manager has a defined role. It can also test whether the overall strategy reflects the family’s goals and circumstances. Meanwhile, estate and succession coordination can connect those financial decisions with the family’s intended transfer of control and wealth. Some owners plan to remain involved in a family business. In that case, family-business and strategic planning may help separate personal wealth decisions from ongoing enterprise responsibilities.

This work can extend to vendor coordination and relationships with outside professionals. For example, Activest can coordinate with service providers. It can also introduce clients to lawyers, brokers, and CPAs that the firm has vetted. However, Activest does not provide legal or tax advice. Readers should consult their own CPA or tax professional about the tax consequences of a sale. In addition, they should obtain legal advice for estate, trust, and succession documents.

For families with Latin American ties, accounts, responsibilities, and family members may span jurisdictions. In that setting, family office services may provide a central framework for cross-border communication and oversight. Some families may consider outsourced family office services instead of building every capability internally. In practice, the right choice depends on complexity, control preferences, costs, and the professionals the family already trusts. This is general education, not individualized investment, legal, or tax advice.

Mistakes Entrepreneurs Make With Liquidity Event Proceeds

A business sale can create meaningful flexibility. However, the first decisions about what to do with money after selling a business deserve more discipline than urgency. Common mistakes include the following.

• Rushing to invest. Moving the proceeds immediately can lock in decisions before your cash needs, goals, and risk capacity are clear. Instead, a deliberate sequence can be more useful than reacting to the size of the account.
• Underestimating taxes and liabilities. The amount wired at closing may not equal the amount available for long-term planning. For example, deal structure, timing, residence, earn-outs, installment obligations, and outstanding liabilities can affect the net result. Therefore, review these questions with your CPA or other tax professional before treating proceeds as fully available.
• Keeping concentrated exposure. After years of building one company, entrepreneurs may remain heavily exposed to the same industry or employer. That exposure can also extend to one geography or to private investments. Of course, reducing concentration requires context, because selling too quickly can also create tax or timing consequences.

Where coordination and family gaps appear

• Accepting fragmented advice. Your CPA, attorney, investment professionals, and family members may work from different assumptions. As a result, important details can fall between the gaps. A coordinated planning process can help clarify responsibilities without replacing specialized legal or tax advice.
• Neglecting family governance and cross-border coordination. A new pool of capital can affect heirs, charitable intentions, and family roles. It can also affect relatives or assets across jurisdictions. Preserving generational wealth often involves conversations about stewardship, succession, and decision-making, not only portfolio selection.
• Treating education as personal advice. A general article cannot determine your allocation, tax position, legal structure, or appropriate level of risk. Instead, you should base those decisions on your circumstances and discuss them with qualified professionals.

Risk and disclosure: Every strategy involves tradeoffs. For example, investments can lose value, and tax outcomes depend on individual facts. In addition, coordination does not eliminate market, liquidity, legal, or cross-border risks. This section is general education, not individualized investment, legal, or tax advice. Finally, consult your CPA or tax professional about your situation.

To discuss a more coordinated approach to post-sale wealth planning, contact Activest.

Frequently Asked Questions

What should you do with the money after selling a business?

Start by confirming the net proceeds, near-term cash needs, taxes, and outstanding obligations with your advisors. Then establish a coordinated plan for liquidity, investing, family goals, estate planning, and any cross-border considerations. Above all, avoid making every major decision immediately after closing.

How much cash should you keep after a business sale?

There is no universal amount. Instead, the appropriate reserve depends on your spending needs, taxes, commitments, portfolio strategy, and time horizon. Review those factors with your investment and tax professionals before moving proceeds into longer-term investments or other uses.

Do I owe taxes after selling my business?

Possibly, but the answer depends on details such as the deal structure, timing, residence, basis, and other facts. Your CPA or tax professional should calculate the potential liability and explain estimated-payment obligations. Meanwhile, an investment adviser can coordinate with that professional but does not replace tax advice.

Should I invest all of my sale proceeds at once?

The answer is not necessarily yes. For example, some families prefer to define liquidity needs and investment priorities first, then deploy capital in stages. Staging may make the decision process more manageable, but it does not eliminate market or timing risk. In addition, any approach should reflect your goals, risk capacity, and circumstances.

Plan Your Next Chapter With Greater Clarity

Deciding what to do with money after selling a business can feel urgent. However, coordinating liquidity, investment decisions, family priorities, and long-term plans can help bring structure to the transition. Activest can help you explore how these pieces may fit together while keeping the discussion grounded in your circumstances.

Contact Activest through the online form to discuss post-exit wealth coordination and next steps.

IMPORTANT INFORMATION: Activest Wealth Management (“Activest”) is a registered investment adviser with the SEC. Being registered with the SEC does not mean the SEC endorses Activest. No information on this material should be construed as a recommendation regarding the purchase or sale of any security unless specifically stated otherwise. Any summaries, prices, quotes, or statistical information have been obtained from sources believed reliable but are not necessarily complete and cannot be guaranteed. Past performance is not indicative of future results. The value of an investment is subject to risk, including possible loss of the principal invested. Please refer to Activest’s ADV Part 2 for additional information and risks.

Credit Suisse publishes an annual Global Wealth Report. Its 2018 edition shows global wealth reached a record 317 trillion dollars in 2018. In our view, it usefully shows where capital is moving and how unevenly people hold it.

How global wealth reached a record 317 trillion dollars in 2018

The report shows growth of 4.6% versus 2017. That works out to $63,100 per adult on average. However, distribution differs enormously between countries. Switzerland, for example, averages a net $530,000 per adult. In contrast, Brazil, Argentina, and other Latin American countries average $5,000 to $25,000.

Averages like this one need careful reading. In other words, a single per-adult figure blends very rich and very poor households into one number. As a result, the mean can sit far above what a typical adult actually owns. For this reason, we treat the global average as a starting point. It is not a portrait of ordinary savers.

Why country gaps matter

The spread between Switzerland and Latin America illustrates how much location shapes household balance sheets. First, higher-income economies tend to have deeper financial markets and more valuable property. Next, long periods of stable growth let savings compound over generations. In contrast, countries that face inflation or currency weakness often see local wealth shrink once converted into dollars. Therefore, the headline gap reflects both real differences in prosperity and the effect of exchange rates.

Concentration remains high

Inequality in capital ownership remains substantial. For instance, more than 84% of global wealth belongs to just 9.5% of the population. Meanwhile, 64% of the population holds only 2% of total capital.

These shares describe a world where a small group controls most assets. Of course, wealth here means net worth, so debts reduce the totals for many households. In practice, a large part of the population holds little or no net capital at all. Above all, the figures show that record totals and broad prosperity are not the same thing.

What a record total does and does not tell us

The fact that global wealth reached a record 317 trillion dollars in 2018 is notable. However, a record total says nothing on its own about who benefits from it. For example, a rise in asset prices can lift the aggregate while most gains go to those who already own shares or property. Meanwhile, households without assets may see little change. As a result, readers should look at distribution data alongside the headline.

Emerging economies keep gaining share

Emerging markets held 10% of global wealth in 2000 and 24% by 2018. In addition, Credit Suisse projects these regions could provide 32% of global growth over the next five years. Actual results may differ.

This shift matters for anyone studying long-term trends. In other words, a growing portion of new wealth now comes from outside the traditional centres of North America and Western Europe. Nevertheless, projections rest on assumptions about growth, markets and exchange rates. Fortunately, the word ‘could’ in the projection signals possibility rather than certainty. That helps readers keep the forecast in perspective.

In the United States, the report finds average wealth per adult doubled over the past 16 years. Of course, currency swings affect these dollar figures. Past trends also do not guarantee future growth.

How to use these figures

Reports like this one offer a useful map of where capital sits and how it moves. First, compare regions over several editions rather than relying on a single year. Next, check whether changes come from real growth or from currency movements. In addition, look at median figures where available, since they describe the typical adult better than averages. Finally, remember that past trends do not guarantee future results. No single dataset should drive financial decisions on its own.

Used this way, the report becomes a tool for understanding context. Instead of reading it as a forecast, treat it as a snapshot of a changing global picture.

By March 2020, the bull market that ran for roughly 11 years appeared to have ended. The rapid spread of the coronavirus outside China set off a severe financial and social shock. In the panic that followed, the S&P 500 fell almost 22% for the year to date. As a result, it stood about 25% below its February 19 high at the time of writing. In other words, the index entered what investors commonly call a bear market. This article explains what a bear market is and how long they usually last, using historical ranges rather than predictions.

What a bear market is and how long they usually last

The common test is simple. An asset typically enters a bear market after a cumulative decline of at least 20% from its peak. Of course, the 20% line can seem arbitrary. However, it screens out the many short-lived dips the market passes through. In contrast, analysts call a decline of more than 10% but less than 20% a correction.

Some specialists sort bear markets into three types: structural, cyclical and event driven. In our view, the recent decline most resembles an event-driven bear market. That judgment could change, however, as events unfold.

Lessons from past cycles

First, statistics that predate the coronavirus put the average bull market at roughly 9.9 years. The latest run lasted about 11 years. In that cycle, the market peaked in October 2007 and bottomed in February 2009. However, a full recovery did not arrive until March 2012.

Next, historical figures suggest downturns have typically lasted 11 to 14 months before the trend changed. Over those periods, the typical decline from the peak has been roughly 30% to 35%. In addition, rebounds after the floor have historically run 6 to 12 months, with returns of roughly 26% to 30%. Most importantly, these are historical averages, and individual bear markets have varied widely. Past performance does not guarantee future results.

How to read these historical ranges

Averages can hide a lot of variation. For instance, a single long downturn can pull the average duration up, while several brief ones can pull it down. Therefore, investors should treat these figures as a rough frame of reference rather than a schedule. In practice, no one can know in advance whether a given decline will prove short or long. Instead, the ranges simply show what has happened before.

Where things stand now

For the moment, the timing of a floor remains uncertain. There is no news of meaningful progress toward a vaccine. Meanwhile, the outbreak is still at an early stage in terms of potential new cases. Governments in the United States and Europe are also adopting increasingly strict measures to counter it.

Fortunately, governments worldwide have supported their economies through monetary and fiscal stimulus. For example, many programs target the small and medium sized businesses that tend to suffer most. This support is unlikely to fully eliminate the economic impact. In practice, it may help limit the damage and could allow a faster recovery, although no one can promise that outcome.

How investors can respond

Understanding what a bear market is and how long they usually last can help investors keep recent moves in perspective. In our view, periods like this call for a diversified portfolio and a disciplined strategy. Above all, a longer time horizon can make short-term swings easier to weather. Of course, diversification does not ensure a profit or protect against loss.

Before making changes, investors can review their goals, time horizon and tolerance for risk. For example, someone who needs cash within a year faces different choices than someone saving for retirement decades away. As a result, the right response depends on personal circumstances. Finally, a financial professional can help an investor weigh these factors against the current market.

This article is for educational purposes only and is not individual investment advice.

In short, the IRS extends the 2020 tax payment deadline to July 15 in response to the coronavirus. However, this relief applies to payments only. In other words, the filing period for returns still closes on April 15.

How the IRS extends the 2020 tax payment deadline to July 15

• First, income tax and self-employment tax payments move from April 15 to July 15, without interest or penalty.
• In addition, corporations may defer up to $10,000,000 per filing. This limit assumes a C corporation that does not file as part of a consolidated group.
• For individuals, the deferral limit is $1,000,000, whether they file as single or married. The same limit applies to other taxpayers, such as trusts.
• Finally, taxpayers must pay any amount above these limits by April 15, or they may incur penalties and interest.

Of course, the initial announcement covers only returns due before April 15. The IRS may issue further changes for returns that fall due after that date. Meanwhile, readers should note that later IRS guidance changed several of these terms. Therefore, please confirm the current rules with the IRS or your accountant before acting.

What the payment deferral means in practice

In practice, the change gives many households and businesses extra time to manage cash. For example, a self-employed consultant who expected to send a large payment in April can keep those funds available for three more months. As a result, the consultant can cover rent, payroll, or other near-term costs while conditions remain uncertain. However, the tax itself does not disappear. Instead, the same amount remains due on the new date, so it helps to set the money aside now.

Keep in mind that the deferral and the filing deadline are separate. In other words, you still need to submit your return by April 15 under the initial announcement, even if you plan to pay later. Most importantly, a complete return gives you and your accountant a clear picture of what you owe before July arrives.

Steps to take before April 15

• First, gather your income records and estimate your total tax for the year.
• Next, compare that estimate with the deferral limit that applies to you.
• In addition, plan how you will pay any amount above the limit by April 15.
• Finally, mark July 15 on your calendar and reserve the deferred amount in a separate account.

Why the timing matters for cash flow

Fortunately, the news that the IRS extends the 2020 tax payment deadline to July 15 gives many taxpayers breathing room during a difficult period. Above all, it lets you keep liquidity while income remains unpredictable. However, deferring a payment is different from reducing it. As a result, a sensible plan treats the deferred tax as money already spent. For example, you might move it into a savings account that you do not touch for other purposes.

Questions to raise with your accountant

A short conversation with a tax professional can prevent costly mistakes. For instance, you may want to ask whether your situation falls under the individual or the corporate limit. You may also ask how the deferral interacts with your other obligations. Meanwhile, business owners should confirm whether their entity files as part of a consolidated group, since the $10,000,000 limit assumes it does not.

Of course, every situation differs. Therefore, treat this summary as a starting point rather than a final answer. Next, bring your prior-year return and your current estimates to the meeting. In addition, ask how any later IRS guidance affects the dates in this article.

Activest Wealth Management is not a tax advisor. For guidance on your situation, we suggest contacting your accountant. Alternatively, let us know, and we can introduce you to a specialized accountant.

The official announcement is available on the IRS newsroom.

During our webinar, tax professionals discussed what the 2020 election could mean for your taxes, including former Vice President Joe Biden’s proposed tax plan. However, these proposals may never become law, and nothing here is individual advice.

Isaac Wakszol, President, and Jacobo Taurel, Managing Director at Activest Wealth Management, worked through key questions with Mike Vidal, CPA, JD, Tax Partner, and Moises Szyller, CPA, Tax Manager at Cherry Bekaert. We recorded the event on Tuesday, December 8, 2020, at 3:00 PM (EST). As a result, it reflects proposals as of that date.

This summary outlines the themes the panel covered and offers general context for each one. In addition, it points you to the full recording so you can hear the discussion in the speakers’ own words. The goal is to help you prepare better questions, not to predict how any law will turn out.

What the 2020 election could mean for your taxes: topics discussed

• Inheritance taxes.
• Taxes on capital gains.
• Income taxes for individuals and corporations.
• Ways families may prepare for possible changes.

Why inheritance taxes came up

Estate and inheritance taxes affect how families pass wealth to the next generation. For example, a change in how much of an estate the tax rules shelter could alter what heirs ultimately receive. The panel therefore spent time on how proposals might affect families who plan to leave assets to children or other loved ones. Of course, any change would depend on Congress and not on campaign statements alone. Families with existing estate plans may simply want to know which parts of those plans could deserve a second look.

How to read the capital gains discussion

Capital gains taxes apply when you sell an asset, such as stock or real estate, for more than you paid. In practice, the timing of a sale can matter as much as the rate itself. The speakers discussed how proposed changes might influence decisions about when to sell. Meanwhile, they reminded attendees that selling purely for tax reasons can create other risks. Above all, investors may want to weigh taxes alongside their broader goals, their time horizon and their comfort with market swings.

Where income taxes for individuals and corporations fit

Income taxes touch nearly every household and business. First, the panel looked at individual income taxes and how proposals might affect different earners. Next, the conversation turned to corporate income taxes, which can influence company earnings. As a result, corporate tax changes can also shape investment returns. In other words, a change aimed at businesses may reach individual investors indirectly. However, the details of any final law could differ from the proposals the panel discussed.

Planning ahead: what the 2020 election could mean for your taxes at home

Families often ask how to prepare when the rules might change. Fortunately, a few general steps can help, whatever the outcome in Washington.

• First, review your current financial plan so you know where you stand today.
• Next, gather recent tax returns and statements for your advisors to review.
• In addition, write down the questions that matter most to your family.
• Finally, revisit your plan once any new law takes shape.

Understanding what the 2020 election could mean for your taxes is only a starting point. Instead of acting on headlines, many families choose to wait for final legislation and then adjust. Most importantly, each situation is different. A strategy that suits one household may not suit another, so personal advice from a qualified professional remains essential.

Questions to bring to your advisors

The webinar format let attendees hear two perspectives at once. For instance, wealth managers can speak to investment strategy, and tax professionals can speak to filing and compliance. Together, they can help you see how the pieces connect. If you have questions after watching, consider bringing them to your own tax and financial professionals. They can then relate the general ideas from the discussion to your specific circumstances.

Finally, the recording of the event is available here.

Pursuing better after-tax outcomes is a core part of our Wealth Management and Family Office services. Tax loss harvesting is one strategy investors use to manage taxes. Below, we explain how tax loss harvesting reduces the tax on your gains in many cases, and where its limits lie.

How tax loss harvesting reduces the tax on your gains

First, consider the accounting. The goal is to shrink the net gain below, sometimes into a net loss:

Net gain or net loss = (long term capital gains minus long term capital losses) + (short term capital gains minus short term capital losses).

In other words, the investor sells positions trading below cost to offset gains realized during the year. As a result, the tax owed on those gains may fall or even disappear for that year. Those gains may come from selling positions or from mutual fund capital gain distributions.

However, harvesting often defers tax rather than eliminating it. The replacement typically carries a lower cost basis, so a larger gain may appear on its eventual sale. Trading costs also matter.

In addition, the IRS lets you deduct up to $3,000 of net capital losses against ordinary income each year. For married taxpayers filing separately, the limit is $1,500 (source: IRS Topic No. 409).

Where carryover losses fit

When losses exceed gains, the unused portion can carry forward. In practice, these carryover losses may offset future capital gains, plus up to $3,000 of ordinary income each year. In contrast, tax on realized gains is generally due for the year you realize them.

Why the portfolio comes first

In our view, tax savings should not drive portfolio decisions. Instead, each portfolio should follow its own objectives, and any harvest should fit them. Therefore, knowing how tax loss harvesting reduces the tax on your gains is only half the picture. Most importantly, coordinate this strategy with your accountant and other advisers.

When harvesting may help most

First, harvesting tends to matter most in taxable accounts. Losses inside an IRA or 401(k) generally do not produce a deductible capital loss. For that reason, the strategy usually applies to taxable brokerage accounts. Next, timing plays a role. Market declines can create opportunities at any point in the year, not only in December. For example, an investor who reviews positions after a sharp drop may find losses that would vanish once prices recover.

In addition, the character of a gain affects the value of a loss. Short term gains are generally taxed at ordinary income rates, while long term gains usually receive lower rates. As a result, a loss that offsets short term gains may save more tax. However, the actual benefit depends on each investor’s bracket and circumstances.

Staying clear of the wash sale rule

Of course, advisors should weigh several IRS rules when changing portfolios. A key one is the wash sale rule, which targets sales made purely for a tax benefit. A wash sale occurs if you sell a security at a loss and buy a substantially identical one within 30 days before or after. As a result, the IRS disallows the loss for now and adds it to the new position’s cost basis. In addition, purchases in a spouse’s account or an IRA can count.

For instance, a hypothetical investor could sell an S&P 500 index fund at a loss. Next, the investor could buy a fund tracking the Dow Jones Industrial Average, a related but different index. However, the IRS has not precisely defined ‘substantially identical.’ Meanwhile, the two funds may perform differently. This example is illustrative only, not a recommendation.

Keeping good records

Finally, careful records help at tax time. Your custodian reports sales and cost basis on Form 1099-B, but your accountant still needs the full picture. Therefore, the family should document each harvest, the replacement purchase, and the dates involved. In other words, clear notes make it easier to track carryover losses and spot potential wash sales across accounts.

This article is educational only, not tax, legal, or investment advice; consult a qualified tax professional before acting.

Seeking better after tax outcomes is a core part of our Wealth Management and Family Office services. One widely used strategy that US tax law permits is tax loss harvesting. This article explains how tax loss harvesting lowers your capital gains bill in many situations. In addition, it covers the limits and rules that apply.

How tax loss harvesting lowers your capital gains bill

The math starts with netting. In accounting terms, the goal is a smaller gain or a net loss from this simplified formula:

Net gain or net loss = (long term capital gains minus long term capital losses) + (short term capital gains minus short term capital losses).

In other words, the investor realizes losses in the portfolio to offset gains realized during the same year. As a result, the tax owed on those gains may shrink or disappear. The gains can come from selling positions. They can also come from capital gain distributions that mutual funds pay to the portfolio.

In addition, IRS rules let taxpayers deduct up to $3,000 of net capital losses against ordinary income yearly. For married taxpayers filing separately, the limit is $1,500. The limit applies per tax return, and your CPA can confirm how it affects you.

What happens when losses exceed gains

Sometimes losses in one year exceed gains plus the annual deduction. In that case, individual taxpayers can generally carry the unused loss forward to future years. Those carryover losses can then offset gains realized later. Meanwhile, tax on gains realized this year is generally due for this tax year.

Consider a hypothetical example for illustration only. Suppose an investor realizes $20,000 in gains and $30,000 in losses in one year. First, the losses offset all $20,000 of gains. Next, up to $3,000 of the remaining loss may reduce ordinary income. Finally, the other $7,000 can carry forward to later years. Actual results depend on each person’s tax situation.

Deferral, not always savings

Of course, the replacement investment usually carries a lower cost basis than the position sold. Therefore, a larger gain may appear when the investor sells it later. In many cases, the strategy defers tax rather than eliminating it. Benefits also depend on tax rates, holding periods, and trading costs.

The portfolio comes first

In our view, tax savings should never drive investment decisions on their own. Instead, the portfolio should stay aligned with its specific investment objectives. Above all, families should coordinate this strategy with their CPAs and other advisers. That coordination is central to how tax loss harvesting lowers your capital gains bill without distorting the portfolio. This article is educational and is not tax advice.

Watch the wash sale rule

In practice, advisers must consider several IRS rules before making portfolio changes. The best known is the wash sale rule. Congress wrote it to discourage selling assets at a loss purely for a tax benefit. A wash sale generally occurs when an investor sells a security at a loss. It applies if the investor buys a substantially identical security within 30 days before or after the sale. Purchases in a spouse’s account or an IRA can also trigger the rule. In that case, the IRS disallows the loss for now and adds it to the basis of the new position.

How to read an illustrative swap

For example, an investor might sell a fund that tracks the S&P 500 index at a loss. Instead, the investor could buy a fund tracking a different index, such as the Dow Jones Industrial Average. The two indexes often move similarly, but their holdings differ. However, similar is not identical, so the replacement may perform differently. Whether two funds count as substantially identical is a question for your tax professional. This illustration is not a recommendation to buy or sell any security.