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The last ten years has seen massive wealth growth in the United States. This brings up the issue of wealth planning, particularly from a tax perspective.

Got Wealth?

There is little doubt that the overall wealth of a significant percentage of Americans has grown like a weed in your garden over the last 10 years. There are a variety of reasons for this growth. Real estate appreciation has set historical records. Stock options are creating massive paper wealth, while also creating tax nightmares. Demographically, a bulge in our population, the baby boomers, are reaching retirement age. Regardless of the reason, wealth planning is becoming a big issue for many people.

Wealth planning strategies tend to be very detail oriented. They also tend to be an option only for certain situations. As a result, you need to speak with a professional regarding each particular strategy to determine if they are of assistance to your situation. These techniques are not universal solutions like stuffing money into a 401k, so don’t take them as such. Let’s take a look at one popular strategy.

Once wealth planning strategy that is very popular deals with real estate. The strategy focuses on making a fixed asset, the equity in your home, grow. Many homeowners do not realize that the equity in their home is not growing. Instead, it is the value of your home that grows, which creates ADDITIONAL equity. Let’s look at an example.

Assume I own a home worth $1,000,000 and have $500,000 in equity. The equity is just sitting there. It does not grow. If the value of the home drops to $900,000, I still have the same amount of equity. If the home appreciates by $100,000, I get an additional $100,000 in equity because the house increased in value, not because my original $500,000 grew in any way. If you can get your mind around this concept, you will realize the problem.

New to Options? Want to trade option? This is the first step for you.

You many know many wealthy individuals make lots of money using options and you can try too.

Stock and Bond trading strategies run the gamut from the simple ‘buy and hold forever’ to the most advanced use of technical analysis. Options trading has a similar spectrum.

Options are a contract conferring the right to buy (a call option) or sell (a put option) some underlying instrument, such as a stock or bond, at a predetermined price (the strike price) on or before a preset date (the expiration date).

So-called ‘American’ options can be exercised anytime before expiration, ‘European’ options are exercised on the expiration date. Though the history of the terms may lie in geography, the association has been lost over time. American-style options are written for stocks and bonds. The European are often written on indexes.

Options officially expire on the Saturday after the third Friday of the contract’s expiration month. Few brokers are available to the average investor on Saturday and the US exchanges are closed, making the effective expiration day the prior Friday.

With some basic terminology and mechanics out of the way, on to some basic strategies.