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Wealth Planning Commentary

Wealth Planning Commentary – February 10, 2025

February 10, 2025

What Policy Shifts Could Mean for Your Long-Term Strategy

Many changes are unfolding in Washington, including ongoing discussions about tariffs – most recently on steel and aluminum. The outcome remains uncertain, leaving many wondering how these shifts could impact inflation and financial markets.

Uncertainty often breeds concern, sometimes even fear, which can reduce consumer spending. Given the current environment, it’s reasonable to expect continued political and market volatility.

But here’s the silver lining: these unknowns present a great opportunity to revisit your long-term wealth strategy. Now is an ideal time to assess how inflation, interest rates, and market performance could impact your long-term objectives.

For example, if the long-term inflation rate trends toward 4%, should that be a concern? If the market remains flat or experiences a prolonged downturn, how much does that matter to your plan? Do you have enough liquidity to weather downturns, and how much is enough?

While political events are beyond anyone’s control, identifying potential financial impacts today can help set the stage for your long-term success. When concerns arise, use them as an opportunity to evaluate whether your current plan is resilient enough to handle uncertainty. If adjustments are needed, it’s better to make them now rather than react under pressure later. A proactive approach can save you unnecessary worry – and time.

Carried Interest in the News

Additionally, last week, President Trump floated the idea of eliminating the preferential tax treatment of carried interest, primarily benefiting hedge funds, venture capital, and private equity executives. Currently, carried interest is taxed at the lower long-term capital gains rate instead of ordinary income rates. This treatment has historically been justified by the argument that it reflects investment risk and aligns managers’ incentives with investors.

It’s unclear where this proposal will lead, as the special rule has survived years of bipartisan scrutiny.

If you have any questions about these developments and how they may impact your wealth planning, please reach out to your Wealth Manager.

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