the past 76 years and adjusts these returns for the impact of income taxes and inflation. These adjusted returns are used to create an efficient frontier that plots expected future real after-tax wealth against volatility in the distribution of expected future wealth. This will be based on just these three asset classes. Our analysis will demonstrate that the conversion from nominal pretax returns to real after-tax returns reduces the perceived riskiness of stocks and increases the perceived riskiness of bills. The reader should get a sense of how difficult it can be to grow wealth net of the impact of taxes and inflation. Chapter 31 integrates estate-planning issues into risk and return calculations. Entities such as retirement accounts, charitable trusts, grantor trusts, and foundations have unique income and estate tax characteristics. Asset location refers to the positioning of the various components of an asset allocation plan among the various entities that make up an investor's estate. Careful asset location can enhance the transfer of wealth to heirs and/or charities by taking advantage of the income and estate tax characteristics of these entities. The traditional efficient frontier assumes optimal allocation of assets. Chapter 31 develops an efficient frontier that also assumes the optimal location of assets. This efficient frontier will reflect the combinations of asset allocation and asset location that give the highest expected result per unit of risk. The construction of the efficient frontier will reflect the investor's plans for long-term wealth transfer. The chart will plot the expected real net transfer of wealth to designated heirs and/or charities against the volatility of the expected real net transfer. Chapter 32 analyzes the impact of taxes on equity portfolio management. Capital gains taxes are due only when a security is sold. The investor generally controls the decision to sell and therefore can defer taxes. Linking the deferral of taxes to plans for the ultimate disposal of the assets can enable an investor to avoid taxation on unrealized gains. This creates a tension between the desire to enhance pretax returns through active portfolio management and the desire to enhance after-tax returns through tax deferral. Chapter 32 explores ways to deal with this conflict and also reviews tax loss harvesting as a mechanism for enhancing after-tax returns from equities. The remainder of this chapter develops a planning framework that reflects the objectives of wealthy investors and allows for the integration of the factors that complicate investment planning for taxable investors. Inflation and spending requirements are considered within that framework. There is a general review of how taxes are assessed and ways investors can reduce tax liabilities. The chapter concludes with an analysis of how to calculate after-tax returns in a manner that reflects the investor's specific planning framework. PLANNING FRAMEWORK At its most basic level, investment management for tax-exempt investors is a two-dimensional problem. The dimensions are risk and return. Investment management, at its core, involves adjusting the expected risk/return trade-off in an attempt to get to a desirable point on the efficient frontier. Individual investors face a multidimensional problem. Taxes, estate planning, and nonfinancial considerations related to estate planning make an already complex problem much more complex.