As we approach the final months of the year, it's crucial for financial and estate planning professionals to help clients optimize their financial positions and ensure their estate plans remain aligned with their goals. Here's a comprehensive guide to important year-end planning considerations you can discuss with your clients.
Gift Tax and Estate Tax Planning
The annual gift tax exclusion for 2024 stands at $18,000 per recipient. Remind clients that this is a "use it or lose it" opportunity – unused exclusion amounts don't carry forward. For clients with substantial estates, utilizing the full annual exclusion for multiple family members can be an effective wealth transfer strategy.
Additionally, with the current lifetime estate and gift tax exemption at historic highs ($13.61 million per individual for 2024), clients should consider whether more substantial gifting strategies make sense, especially given the scheduled reduction of the exemption amount in 2026.
Required Minimum Distributions (RMDs)
For clients aged 73 and older (new age requirement as of 2023), ensure they've taken their required minimum distributions from retirement accounts. The penalties for missing RMDs are steep – 25% of the amount that should have been withdrawn. Consider whether qualified charitable distributions (QCDs) might be an effective way to satisfy RMD requirements while achieving charitable goals.
Investment Portfolio Review
Now is an ideal time for a comprehensive portfolio review:
Harvest tax losses to offset gains
Rebalance portfolios to maintain target allocations
Review concentrated positions and develop diversification strategies
Evaluate whether Roth conversions make sense given current market conditions
Charitable Giving Strategies
With the standard deduction remaining high, bunching charitable contributions into a single tax year may help clients exceed the threshold for itemizing deductions. Consider discussing:
Donor-advised funds
Qualified charitable distributions from IRAs
Gifting appreciated securities instead of cash
Creating charitable remainder trusts
Business Planning Considerations
For clients who own businesses, review opportunities for:
Maximizing retirement plan contributions
Accelerating expenses or deferring income
Evaluating equipment purchases that might qualify for Section 179 expensing
Reviewing business succession planning documents
Trust Review and Updates
Year-end is an excellent time to review existing trusts and ensure they remain aligned with clients' objectives:
Verify trust funding is complete
Review trust distribution provisions
Evaluate whether existing trusts should be modified or decanted
Consider creating new trusts to take advantage of current exemption amounts
Insurance Review
Conduct a comprehensive insurance review to ensure adequate coverage:
Life insurance
Long-term care insurance
Disability coverage
Property and casualty insurance
Document Review
Remind clients to review and update key documents:
Wills and trusts
Healthcare directives
Powers of attorney
Beneficiary designations
Digital asset instructions
Looking Ahead
As we move toward year-end, it's crucial to help clients understand that effective planning requires proactive engagement. Many strategies require time to implement properly, so starting these conversations early is essential.
Remember that year-end planning isn't just about tax efficiency – it's an opportunity to ensure clients' overall financial and estate plans remain aligned with their long-term goals and objectives. Taking a holistic approach to these discussions can help strengthen client relationships and demonstrate your value as a trusted advisor.
Action Steps
Schedule year-end planning meetings with clients
Prepare personalized checklists based on each client's situation
Coordinate with other professional advisors (CPAs, attorneys)
Document all planning discussions and decisions
Set follow-up dates for implementing agreed-upon strategies
By taking a systematic approach to year-end planning, you can help ensure your clients make the most of available opportunities while positioning themselves for success in the coming year.
William W. Lane, Esq. serves as a Trust Counsel at Loring, Wolcott, & Coolidge, LLP and is president of the Trusts & Estates Consortium.
Note: This article is for informational purposes only and should not be construed as legal or tax advice. Always consult with appropriate professional advisors regarding your specific situation. All tax rates, limits, and thresholds referenced are subject to change. Verify current figures with official sources.
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