Free Wealth Management Guide Investing Proceeds From the Sale of Farm or Ranch | Page 4

Section 664 Charitable Remainder Trust.
Using a combination of a 1031 Exchange and a Charitable
Remainder Trust may allow you to maximize tax savings
and enhance investment diversification. While the 1031
Exchange is used to invest in real estate, a CRT allows
you to invest in other assets including stocks, bonds and
mutual funds. While investment strategies cannot guarantee performance results, having a diversified portfolio of
real estate, stocks and bonds has been a proven strategy
for providing long-term retirement income that has outpaced inflation.

Getting Started Investing
Before jumping into an investment it is wise to perform a
self-assessment of your financial situation and determine
what you want to achieve with your money going forward.
This self-assessment should address factors such as your
goals, your time horizon for investing, your tolerance for
investment risk and your need for liquidity.
Goals
Identifying your financial goals and the investment return required for attaining those goals is an important
first step. We think it is prudent to achieve your goals by
taking as little risk as possible. Knowing what return you
need to achieve your goals will help determine how you
invest. A financial advisor can assist you with this process.
Time Horizon
Once you define your goals, determine how long your
money must work for you to achieve those goals. If you
are investing for retirement, you typically want to plan for
having enough money to last for you’re life expectancy.
You want your money to last as long as you do. The time
horizon for a particular investment will dictate the type of
investment options you should consider.
Risk Tolerance
Assessing your tolerance for risk is imperative because
if you get into an investment that experiences a loss of
more than you can tolerate, you are liable to pull out of
that investment at the worst possible time. To determine
your tolerance for risk, ask yourself what is the largest
percentage loss you are willing to tolerate in a 12-month
period. Then look at the historical performance of various

portfolios ranging from the most conservative to the most
aggressive. When analyzing the historical performance of
an investment, it is important to look at as many years
as possible. An investment may have a good short-term
track record but all investments go through up and down
cycles and you want an investment that has proven itself
over time. By having a good grasp of your risk tolerance
and historical returns of various portfolios, you can help
match up a portfolio that is suitable for you.
Liquidity
Another important consideration when investing is to
determine your need for liquidity. Liquidity is the degree
to which an asset can be bought or sold in the market
without affecting the asset’s price. Assets that can be
easily bought or sold are known as liquid assets. Having adequate liquidity is important because if a need for
cash arises and you don’t have a ready source of liquid
investments, you may have to sell an asset and for less
than you could if you had more time.
Account Ownership
An important decision with investing is choosing how
to own the account. There are many ways you can own
investments such as Individual, Joint Tenancy With Rights
of Survivorship (JTWROS), Tenancy-In-Common (TIC), in
different types of trusts, corporations or LLC’s etc. How
an account is owned can have serious tax and estate
planning implications. It is critical to make sure your
accounts are owned in a manner that lines up with your
current needs and your estate planning objectives.
Taxable vs. Tax-Advantaged
The tax treatment of your investments is another important consideration. Not all accounts and investments
are taxed the same. Both the types of products you own
and the types of accounts you hold them in affect the
taxes that you pay. Some accounts and investments offer
tax-deferred growth. Some investments have tax-exempt
interest and some investments are tax efficient. A good
investment plan will help you maximize the tax benefits
available to you.

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