Uncertainty over taxation is increasing as the Bush-era tax cuts face extinction. That is causing investment advisers to look for innovative tax-advantaged vehicles for their clients.

“We have a lot of uncertainty with regard to taxes, which is exacerbated by the approaching election,” said Bill Lowe, president of Sammons Retirement Solutions, a member of Sammons Financial Group, an insurance holding company with over $42 billion in assets.

The fate of the George Bush tax cuts, which are due to expire at the end of 2012, will hinge on a lame-duck Congress that convenes between Thanksgiving and Christmas. It’s likely that wealthy individuals will face higher taxes in 2013.

That’s likely to skew investment decisions toward tax-advantaged assets, such as municipal bonds.

“Municipal bonds will likely be a beneficiary of the increased uncertainty in taxes,” said Lowe.

The opposite is true for dividend stocks, which are “attractive because of taxation of dividends at capital gains rates, and also because dividend paying stocks exceed what you can get in fixed income,” said Lowe. “But when the Bush tax cuts expire, dividend income will triple.”

A new version of quantitative easing was announced this week in which the Fed will continue to buy mortgage-backed securities and other assets until it sees significant improvement in the labor market. It also extended its low interest rate policy until mid-2015.

According to a survey by research firm Spectrem Group conducted in August, investors have mainly the same confidence level they had a year ago in the stock market.

Those that indicated that they feel more confident about the stock market tended to be more affluent investors, with 26% of those with a net worth (not including primary residence) of $1 million or more feeling much more or somewhat more confident in the stock market.

“The federal deficit and likely tax increases are major threats to economic growth is identified by 63% of investors as a primary reason why they are less confident,” said George Walper, president of Spectrem Group. “That is closely followed by concerns over the European debt crisis, causing extreme market volatility and unemployment remaining high. The overall feeling that the stock market is too risky is a sentiment shared by 24% of the investors surveyed.”

Sammons Retirement Solutions has developed a tax-deferred mutual fund IRA product that combines tax benefits with diversification.

Called LiveWell Mutual Fund IRA, the product offers 100 mutual funds from 19 fund complexes within an IRA.

“The IRA rollover market continues to be a driver for a lot of investment professionals,” said Lowe. It’s a $50 billion market today, and is projected in six years to be $600 billion as the Baby Boomers retire, added Lowe.

The LiveWell Mutual Fund IRA is a “commission-based product, not a fee-based product, which means the client pays no front-end load charges, just a record-keeping fee as low as 40 basis points”, said Sammons.

Morningstar Associates, an investment consultant, provides recommendations to Sammons Retirement Solutions regarding asset allocation targets for the LiveWell Mutual Fund IRAS, and a companion product, LiveWell Variable Annuity.

“Morningstar provides credibility in terms of asset allocation, and it’s free of charge,” said Lowe. “This is a very attractive package for advisers to provide a turnkey solution.”