544 PRIVATE WEALTH TABLE 29.

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3 Expected After-Tax Returns in Various Situations Asset Expected Pretax Return and Composition   Money market fund Tax-exempt bond Treasury bond High-yield bond fund Passive equity Active equity 3% 4 10 11 3% taxable income 4% tax-exempt income 6% taxable income 7% taxable income, 2% annual appreciation, 50% annual turnover 2% dividend yield, 8% annual appreciation, 5% annual turnover 2% dividend yield, 9% annual appreciation, 30% annual turnover 5% turnover on passive equity is consistent with historic change in the composition of the S&P 500. Expected After-Tax Return, Five-Year Holding Period Liquidation Mode Bequest Mode Tax-Deferred Mode   Money market fund Tax-exempt bond Treasury bond High-yield bond fund Passive equity Active equity 1.80( 4.00 3.60 5.81 7.79 8.54 1.80( 4.00 3.60 5.89 9.00 9.17 1.84= 2.47 3.76 5.76 6.44 7.13 Expected After-Tax Return, 25-Year Holding Period Liquidation Mode Bequest Mode Tax-Deferred Mode   Money market fund Tax-exempt bond Treasury bond High-yield bond fund Passive equity Active equity 1.80% 4.00 3.60 5.82 8.24 8.65 1.80% 4.00 3.60 5.83 8.74 8.79 2.04% 2.81 4.46 7.11 8.03 8.96 options embedded in the tax code. We will discuss how this can be used with powerful results in the next chapter. CONCLUSIONS 1. Wealthy investors generally have more than enough wealth to meet their spending needs. Thus, the financial goal is to maximize what can be transferred to heirs and/or charities net of income, transfer, and estate taxes. Estate and transfer taxes have such great impact that an investment planning framework must take them into account.

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