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Year End Wealth Management: 9 Key Opportunities

December 10, 2021

Year end is the perfect time to review your estate plan, insurance policies, gifting strategies and more. Here are some things you should consider before December 31, 2021.

9 key opportunities

  1. Review your estate plan- Make sure your estate plan still aligns with your goals. Review your beneficiaries—did you recently get married or have a child? When your life circumstances change, your beneficiaries may also change. If you get divorced, have children, become disabled, acquire property, deal with family deaths, or have some other major life event, it is always a good time to review and potentially revise your estate plan. Here are some key review triggers:

    -Children- As soon as you have kids, you should decide who you’d like as their guardian in the event that you are not able to care for them. This should also be reviewed periodically as the kids grow up as the individuals you named when they were born may no longer be appropriate or capable of taking on this responsibility.
    -Marriage- If you get divorced, it’s likely that you will no longer be leaving assets to your ex-spouse. If you neglect to revise your estate plan and something happens to you, you can inadvertently leave assets to your ex.
    -Beneficiaries- Have any of your potential beneficiaries passed away? This may also require an adjustment to your legacy and may inadvertently give more money to the remainder beneficiaries than you originally intended. If any of your beneficiaries become disabled, there are certain steps you need to take to ensure that your generosity does not disqualify that individual from governmental benefits.
    -Changes in assets-As the years progress the nature of your estate will change; it is always a good idea to periodically review your estate plan to make sure it aligns with what you currently have.

  2. Plan for tax changes- Though the Build Back Better Act (BBBA) is far from final, it is wise to consider how potential tax changes will impact your financial planning. Changes on the horizon include a 5% surcharge on modified adjusted gross income (MAGI) exceeding $5 million for married individuals filing separately, $200,000 for estates and trusts and $10 million for all other individuals. An additional 3% surcharge would be assessed on MAGI over $12.5 million for married filing separately, $500,000 for estates and trusts and $25 million for all other individuals. Additional changes include an increased SALT limitation- from $10,000 to $80,000 and elimination of the back-door Roth IRA

  3. Plan for Required Minimum Distributions (RMD)- Check out our blog, Turning 72 in 2022? Here are Your RMD Requirements. Your required minimum distribution is the minimum amount you must withdraw from your account each year. This applies to Individual Retirement Accounts (IRAs), SIMPLE IRAs, and SEP IRAs. The SECURE Act changed the age requirement from 70 ½ to 72, meaning anyone whose birthday falls on or after July 1, 2019 has until age 72 to take his/her first RMD. You have as late as April 1 of the year following the year you turn 72 to take your first RMD. For each year thereafter, the RMD must be made annually by December 31st.

  4. Review your portfolio and investment policy- Make sure your investments still align with your evolving goals. You may need to revisit your investment objectives, factoring in life circumstances, family changes, etc. Additionally, you should address your asset allocation (how much you hold in stocks, bonds and cash) and compare your current allocation with your liquidity, income needs, risk tolerance and time frame.

  5. Plan for year-end charitable giving- Check out our blog, 2021 Year End Giving Guidelines. Giving to charity this time of year is a smart move – not only will you be benefiting those less fortunate around the holidays, but your donations can provide you with valuable tax deductions. As our blog mentions, you can consider investing in a donor advised fund, which allows you to make a tax-deductible contribution to the fund and then recommends grants from the fund to a specific public charity. This is great for year-end tax planning if you’re not yet sure which charities you would like to support but want to get the tax deduction before year end.

  6. Consider wealth transfer strategies- Wealth transfer strategies require periodic updates. Some strategies may be limited by the BBBA, including the use of grantor retained annuity trusts and the estate tax exemption (could decrease from $11.7% per person to approx. $6 million per person).

  7. Review your cybersecurity habits- Check out our blog, 2021 Dirty Dozen Tax Scams for a list of the most current cyber scams and tips for protecting yourself online. Recent cyber threats include pandemic related scams, social media scams and fake charities. Make sure you review your privacy settings on social media, and NEVER click on suspicious links or email attachments.

  8. Plan for Qualified Charitable Distributions (QCD)- Check out our blog, Tax Saving Strategy: Qualified Charitable Distributions (QCDs). A QCD can help you lower your taxable income and benefit the charities of your choice, because it does not have to be included in your income. It is considered an “above the line deduction” meaning that it is a reduction in your gross income as opposed to a potentially limited itemized deduction. You can donate up to $100,000 per spouse directly from your IRAs.

  9. Revisit your insurance policies- Review your existing coverage and assess whether it still makes sense for your situation. Have you invested in life insurance yet? Although in some cases life insurance comes with high premiums, it is a crucial element of financial planning, and something that will help secure a more stable financial future for your loved ones when you’re gone. Life insurance is subject to underwriting based on your health, so it is best to consider purchasing a policy when you are young and healthy.

Questions? Contact us.

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