Establishing a line of credit can be a cost-efficient way to use liquidity strategically: You can make tax payments or fulfill other short-term obligations without having to sell assets or deplete cash reserves, which disrupt your carefully constructed investment plan.
“Most people think about paying taxes once a year, on April 15, but the fact of the matter is that many high-income earners are paying estimated quarterly taxes,” says Scott Milleisen, U.S Head of Capital Advisory for J.P. Morgan Private Bank. “So having access to a line of credit allows you to smooth your cash flows, and separate your investment decisions from your liquidity needs.”
Maintaining financial flexibility
Using a line of credit to separate your investment decisions from your liquidity needs is particularly helpful when you have a substantial investment portfolio, illiquid assets or concentrated positions that would take time to sell or require other considerations.
A line of credit can also help you postpone liquidating assets to defer capital gains tax, keep long-term wealth planning on track, and preserve cash for emergencies or other needs.
“Many clients tell me that the thing they value most is financial flexibility, and having access to credit gives them the dry powder to fund business deals, to meet personal obligations, and to execute on their aspirations, whether that’s buying a dream home or making a gift to charity,” Milleisen says.
Liquidity for a range of uses
Beyond tax payments, a line of credit can be an effective way to access liquidity for a variety of needs or goals, including:
Furthermore, a line of credit can potentially be structured in a tax-efficient way, which may enable you to preserve and grow your wealth more effectively.
Regularly review your liabilities
At J.P. Morgan, we believe it is important to periodically review your borrowing strategy, similar to how you review your investment portfolio. By doing so, you can ensure your liabilities are aligned with your financial goals, the current rate environment and changing market conditions. “There’s a lot of value to bringing rigor and discipline to planning the liability side of your balance sheet,” Milleisen says “That means planning for your liabilities ahead of time—having access to credit before you identify a need.”
We can help evaluate your liquidity needs over the short, mid and long terms, and determine the right borrowing strategy for your specific needs and overall wealth picture.
To learn more about lending solutions at J.P. Morgan Private Bank, please contact your J.P. Morgan representative.