4 year-end tax and estate planning ideas

It’s time to act before the new year.

What a year it’s been! A crazy stock market. An election. A pandemic.
I have to commend you all for hanging in there with your investment strategy through the course of the year. Your patience has been rewarded. The stock market as measured by S&P 500 Index* sits higher than when the year began.

With less than a month to go before the new year, it’s time to present some reminders — and possible opportunities — for you to stay on plan and maybe even reduce some taxes going forward. I have for you 4 tax, estate and financial planning ideas.#

These ideas cover the areas of financial planning, charitable giving, gifting exemptions and more.

Of course, I can’t say what shifts in tax policy may take place in the days ahead in Washington, D.C., in the legislatures of your home states, or in your local community. Nevertheless, here are a few ideas for you to consider.

1. Review your financial plan and related documents

The global COVID-19 pandemic will continue to create economic and public health uncertainty until an effective vaccine or group of vaccines can bring it under control. So, more than ever, it’s important to review some key planning documents to make sure they’re up to date and aligned with your financial and estate plans:

  • Will
  • Revocable trust (if you have one)
  • Power of attorney documents
  • Advance directive

None of us expect to face the unthinkable. But that’s why it’s both loving and kind — and practical — to leave clear direction in writing with your loved ones and close associates. If you are unsure where to begin, please call me.

2. Take advantage of estate tax exemptions

While the SECURE Act of 2019 raised the exemptions for estate taxes, I believe these will sunset in 2025. Given the changing political landscape, we see the potential for those estate tax exemptions to decline. Some individuals and families could benefit by using the higher exemptions before they sunset.

3. Gift assets to children or grandchildren

Currently, an individual may gift $15,000 annually — $30,000 for a couple filing a joint tax return — to any number of children or grandchildren.

  • Gifting assets that may have declined in value can benefit recipients when those assets later appreciate.
  • There’s no limit on transfers of assets if the funds are paid directly to a medical provider, or to an educational institution as tuition, according to Internal Revenue Code (IRC) Section 2503(e). 
  • Gifting can be a great way to reduce the taxable estate and provide significant aid to family members adversely impacted by the pandemic.

4. Make a donation to charity

When considering whether it’s more advantageous to make a gift in 2020 or wait until next year, you’ll want to take this into account:

  • The Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 permits individuals to gift up to 100% of their adjusted gross income to qualified charities. Obviously, that’s a huge stretch for most folks, but the point is, you can donate more this year and thereby lower your taxable income.

Each of these 4 strategies requires planning and coordination with your tax, legal and investment advisory team. If you’re interested in learning more, call my office as soon as possible. We’ll need time before the year ends to evaluate your options.

In conclusion, let me say again that I’m proud of the resilience you have shown. You did great in a tumultuous year sticking with your investment plans. I want to say, keep that resolve going forward. Stay safe. And enjoy the holidays with your families. Bianca and I wish you the best in the coming new year.

*The S&P 500 (Standard & Poor’s 500) is an unmanaged group of securities considered to be representative of the stock market in general. The index cannot be purchased directly by investors. Past performance is no guarantee of future results.

#Neither South Bay Asset Strategies nor LPL Financial provides tax or estate planning advice. We can, howrecommend specialists in these areas.