Tax Considerations for Inherited Wealth and Investment Strategy

As a private wealth manager, you are advi\sing a high-net-worth client, Mrs. Thompson, aged 60, who received a subs\tantial inheri\tance of $2 million. She currently has a diversified investment portfolio valued at $5 million, primarily composed of stocks and bonds. Mrs. Thompson is concerned about the potential tax implications of her inheri\tance and how it will affect her overall financial strategy, including her retirement plans. She also wishes to unders\tand the impact of state and federal estate taxes on her newly acquired wealth, the benefits of tax-efficient investment vehicles, and how to balance her need for income with tax considerations. In your response, discuss the tax implications of Mrs. Thompson's inheri\tance, appropriate investment strategies that would optimize her tax situation, and any estate planning considerations she should be aware of.