For years we have been telling our clients, if you have questions or anything changes, call us; however, we are finding we get the question somewhat frequently, “but specifically when should I call you?” Or we find out about a major life change several months or a year after the fact because clients or their family members did not realize that they could or should call us. We thought we would try to clear some of that up and give you some guidelines on when you might want to think about picking up the phone or shooting us an email. We’re here to be a resource for our clients, and we never want you to feel like you just have to figure it out on your own. Here are some reasons you might want to reach out:
Every year, at the start of the year, many of us make New Year’s resolutions. We think about the things we want to be different in our lives, and we resolve that we’re going to change them. For some of us, this actually results in life changes every year. For most of us, we have the best of intentions, but life gets busy, or challenges come up, and by February our resolutions are a thing of the past. Personally, I’m resolving to make more time for creativity in 2021—dust off my keyboard, do some more crafts and artwork with my kids. You can ask me in a few weeks what we’ve created, and we’ll see how it goes. I’m pretty sure my 1st grader and preschooler are resolving to find a way to get me to bake more cookies in 2021.
What a year it has been!
We all know that it’s been a crazy year navigating a global pandemic and keeping our family safe, but it’s also been an extraordinary year when it comes to estate tax, estate planning and changes in the law.
Managing money is something we all strive to continuously improve upon. They are always newer, bigger, and better financial goals to set for yourself. Yet, many of us don’t feel confident in our ability to be financially savvy or to stick to resolutions regarding finances. The new year is typically a prime time to set new goals, but all the advice out there can be overwhelming and deter you. There are apps, articles, social media accounts, books, etc. Instead of wading into the abyss, we have a few recommendations for you start off 2020 with to boost your financial confidence before you start any other financial journeys. These recommendation concepts are drawn and expanded upon from a recent article from Nerd Wallet, “6 Empowering Money Moves to Boost Your Financial Confidence”. These tips are not only ones that we encourage you to practice, but also your loved ones (think recent or soon to be graduates). We are only going to highlight a few of their 6 “money moves”, but feel free to give the article a read if you want to see the others!
Happy New Year! It’s day 2 of the new decade and it is a great time to review or move forward with your estate planning. Estate planning is a comprehensive plan designed to take care of your loved ones, not just a single document. As our clients know, it is important to regularly review all aspects of your plan, your finances, and your family’s needs. Whether or not you have a plan with us, take some time this month to review the below categories and then schedule a time to come in and either establish your estate plan or go over plan updates with our team!
Beneficiary Designations: For assets such as life insurance and retirement accounts, the beneficiary designation form is crucial. If these documents are not filled out properly, the wrong or unintended person could end up with your asset, completely unraveling your estate plan. As a result, it is a good idea to review these documents periodically to make sure that the correct beneficiary is named. Life can change quickly, and sometimes changing beneficiary designations is the last thing on anyone’s mind.
Why not spend some time now, while the year is young, taking the steps that will bring you closer to your financial goals for 2018 and beyond? Kiplinger has some great pointers to share in the recent article, “12 Smart Financial Moves for the New Year.”
1. Increase your retirement-savings contributions. If you’ve been maxing out your 401(k) or are turning 50 this year, up your automatic contributions to take advantage of higher limits and catch-up opportunities. You should also set up automatic monthly contributions from your bank account or paycheck into an IRA. This will allow you to save before you have an opportunity to spend it.
2. Make a charitable-giving plan. When you earmark funds for charity, think of the ways you can contribute—by writing a check, giving appreciated securities, giving to a donor-advised fund, or making a tax-free transfer from your IRA (if you’re older than 70½). Ask your estate planning attorney how the new tax law may impact your charitable-giving strategies.
3. Make the most of the new tax law. Speaking of the new tax law changes, look at how it may affect your charitable giving, IRA conversions, home-equity loans, medical-expense deductions and 529 college-savings accounts. There are some key financial strategy changes. Speak with your estate planning attorney to learn if there are new opportunities for your estate plan. Don’t miss out!
As 2017 winds down and the holiday season ramps up, don’t miss the opportunity to review a few key items that may benefit you heading into the new year. It’s always a good idea to check in with your accountant to see if there are any last-minute income tax strategies, expenses or deductions that need to be in place before year-end that may reduce your tax liabilities. Be sure to discuss with your accountant any required minimum distributions you must take from any IRA, 401(k) or other qualified retirement plan (or from any inherited qualified retirement plan or IRA).
Every season has its traditions, and the last quarter of the calendar year is always the time to meet with your advisors to review a number of matters before the year ends, according to The (Hot Springs, AR) Sentinel-Record in “Check this list — twice — before year-end.” All of this should be done with an eye to your long-term financial and personal goals. You can start thinking, planning and scheduling meetings now so you’re not under the gun in the midst of the holidays!
Keep track of your RMDs. Understand the rules on required minimum distributions (RMDs). If applicable and if you have yet to do so, take your 2017 RMD to avoid a 50% penalty on required amounts not taken. An experienced financial professional can help you plan for your RMDs.
Here are a few other RMD-related considerations when speaking with your financial professionals:
- Automate your RMDs so you never miss this important deadline.
- Take your first RMD during the year you reach 70½ or delay it until April 1st of the following year. However, be aware that if you delay and take two distributions in the first year after 70½, your income could go up and this may put you in a higher tax-bracket.
- Qualified charitable distributions permit traditional IRA owners who transfer RMDs to qualified charities to exclude the amount donated from their adjusted gross incomes—up to $100,000.
Tax harvesting. Look at whether you could benefit from tax-loss harvesting. This simply refers to selling a losing investment to offset gains or establish a deduction of up to $3,000. Excess losses also can be carried forward to future years. Here are some things to consider when speaking with your financial and tax professionals about decreasing your tax bill:
- Short-term gains are taxed at a higher marginal rate, so try to reduce those first;
- Don’t upset your long-term investment strategy when harvesting losses; and
- Understand the “wash sale” rules that impact new purchases before and after the sale of a security.
Wash sale. If you sell a security at a loss, then buy another “substantially identical” security within 30 days before or after the sale date, the IRS typically considers this to be a “wash sale” and will disallow the loss deduction. Be sure to work with your financial professional to ensure any wash sales are intentional.
Income and deductions. If you’re at or near the next tax bracket, pay close attention to anything that might bump you up and plan to reduce some taxable income before the end of the year. Chat with your financial professional about some of these ideas:
- Make a donation to a charity. This can benefit a good cause and reduce your taxable income. You also can gift up to $14,000 tax-free to as many people as you want and without needing to file a gift tax return.
- See if it makes sense to accelerate deductions or defer income, which may let you to minimize your current tax liability.
- Some retirement plans also can help you defer taxes. For example, contributing to a traditional 401(k) lets you to pay income tax only when you withdraw money from the plan in the future (when your income and tax rate may be lower or you may have more deductions available to offset the income).
- Analyze your income sources, such as earned income, corporate bonds, municipal bonds, qualified dividends and others, to reduce the overall tax impact.
Changes in life. Your year-end planning should take into consideration changes that have occurred in your life, as well as changes in the lives of close family members. Moves to a new state, divorces, weddings or births are all things that will impact your estate plan. Schedule a time to meet with your estate planning attorney to ensure your estate plan still reflects your wishes for loved ones.
Changes in assets. Have you bought a house since you last updated your estate plan? Did you change jobs? Roll over an old 401(k) into IRA? Any changes in assets should trigger a conversation with your estate planning attorney. After all, the way you own your assets will determine what happens to them after you pass—often superseding any instructions in a will or trust if not properly aligned with your plan. Plan to have a conversation with your estate planning attorney before year-end to ensure everything in your plan is the way you want it and your assets are all aligned with the plan.
At Family Estate Planning Law Group, we know that changes in life and in assets are not infrequent, so we work with all our clients on an ongoing basis to make sure their estate plan works the way they intend when they pass. Whether that’s five, ten, or fifteen years into our relationship with them, we want to ensure their families are cared for the way they wanted at their passing. To accomplish this, we partner with your financial professionals, working together to ensure your retirement and other investment accounts, insurance policies and other assets are owned in the most efficient way for both you and your heirs.
For more information on why assets are so crucial and how we partner with your financial professionals, explore our website and contact us to schedule your consultation today!
Reference: The (Hot Springs AR) Sentinel-Record (October 8, 2016) “Check this list — twice — before year-end”
We’ve all given someone a gift card. It’s a popular gift, especially around the holidays. In fact, a recent pollfound that 56% of those interviewed planned to give gift cards this holiday season. But there’s a new development in gift cards: you can now purchase a gift card for a 529 plan. A recent Investopedia article looks at the details. [Read more…]