Advisors pivot as wealthy families rush to beat tax reform

Tax reform uncertainty is forcing high-net-worth investors to act now, not later. Many advisors aren’t waiting for legislation; they’re maximizing existing exemptions and restructuring wealth strategies to stay ahead of whatever comes next.

The lifetime gift and estate tax exemption stand at $13.99 million per person in 2025. But under current law, these elevated thresholds—established by the 2017 Tax Cuts and Jobs Act—are set to sunset at the end of 2025. Without congressional action, the exemption will fall by about half, reverting to an estimated $7 million per person, adjusted for inflation. Wealthy families now face a narrow window to lock in today’s historic advantages before they potentially disappear.

Gautam Muthusamy, Managing Partner at Arcadia Capital, views this shrinking timeline as a catalyst for action. With over a decade of experience guiding high-net-worth clients through volatile tax landscapes, he is helping families pivot early building flexible, tax-efficient strategies designed to endure political and economic shifts.

“The hardest part in all of this is knowing what the tax policies might be,” Muthusamy says.

But uncertainty doesn’t justify inaction. At Arcadia, preparation begins with proactive engagement—frequent conversations with clients, CPAs, and estate attorneys to map out “if-then” planning scenarios.

“We’ll get on the phone with them. We’ll talk to them and discuss what those shifts in tax policies might be and what we might do in response to that,” he explains. “Our biggest thing is being proactive, not reactive.”

That mindset is especially critical as estate tax reform looms. Arcadia is already seeing clients act—using family limited partnerships and intentionally defective grantor trusts to reduce estate values, with some even exhausting their lifetime exemptions now.

“We believe it’s going to lead to high-net-worth investors to possibly gift more out of their estate now,” Muthusamy says. “We have seen some families go as far as to say, ‘We’re going to accelerate that now and exhaust the credit.’”

From tax-planning tools to emotional calculus

If capital gains tax rates increase, that will introduce another layer of complexity. Instead of waiting for definitive action, Arcadia has already begun modeling potential outcomes and introducing charitable giving strategies as part of broader estate and tax planning.

“Anything from QCDs, qualified charitable donations, GRATS, SLATs, CRTs,” he says, emphasizing the importance of capturing value for heirs or charitable causes while minimizing exposure down the line.

One area clients often overlook is the value of transferring appreciated assets today, even if it sacrifices the step-up in basis. For families with long-term holdings—particularly generational land or businesses—this tactic is designed to support legacy preservation.

“They want an incentive for their family not to sell that investment,” Muthusamy explains, pointing to farming families that discourage heirs from cashing out quickly.

At the same time, income tax remains a constant, prompting year-round strategy layering. Arcadia routinely reviews client tax returns, evaluates income expectations, and coordinates investment decisions.

“We overlay a tax strategy on the investment strategy,” he says. “We use our tools to evaluate our clients' tax returns. We plan out what this year might look like.”

That means being intentional about asset location, placing qualified dividends and municipal bonds where they’ll be taxed most favorably.

It also informs how portfolios are constructed. Rather than relying heavily on mutual funds, Arcadia leans into individual securities, allowing for more precise control over capital gains and loss harvesting.

“We really lean on individual stock and bond holdings,” Muthusamy says. “We have seen a shift away from mutual funds.” With direct holdings, his team can more actively manage tax exposure.

But smart product selection is only part of the puzzle. Arcadia also emphasizes where those products live—taxable versus tax-deferred accounts—and how to sequence distributions in retirement.

“Aside from just the investments that we use, it’s also what accounts they go in,” Muthusamy explains.

Flexibility over forecasts

The real challenge, however, isn’t legislative—it’s psychological. Clients are contending with ambiguity, and that shapes their emotional relationship with wealth planning.

“Uncertainty is probably the key word for this year,” Muthusamy says. That ambiguity is mirrored across the advisory ecosystem. “The attorneys we talk to are very shy from giving any definitive answers either,” he adds. “Everyone has one foot on this side, one foot on that side.”

That’s why adaptability—not prediction—is the true differentiator. Arcadia emphasizes flexibility in both strategy and execution, tailoring its approach based on client timelines and risk appetite.

“We don’t want to react and put in some permanent changes that may be relevant today but may not be relevant in the future,” Muthusamy says. “We are careful not to be too reactive, but with our clients that we do need to be reactive, we certainly are not shy to make those changes.”

At the end of the day, Arcadia’s focus is on preparing early, building in flexibility so clients can adapt the moment policy shifts.

_{Gautam Muthusamy, Financial Advisor, RJFS}

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