2023 Year End Financial Plan Checklist

December 1, 2023

We have mentioned important points to consider regarding income tax, estate and gift tax, retirement and investment  planning before the year end. 

INCOME TAX PLANNING

•  Harvest capital losses to offset any realized gains or rebalance taxable investment  accounts.

•  Consider harvesting any capital gains that can be realized in the 0% tax bracket.

•  Review charitable contributions to maximize income tax deductions.

1.                Consider donation of appreciated assets that have been held for more than one year, rather than cash.
2.                Opening and funding a Donor Advised Fund (DAF) as it allows for a tax-deductible gift in the current year and also the client’s ability to dole out those funds to charities over multiple years.
3.                Qualified Charitable Distributions (QCDs) are another option for those over 70.5 and especially for those who don’t typically itemize on their tax    returns.
4.                When reviewing charitable contribution decisions, consider bunching the contributions to exceed the standard deduction.

•  Weigh the benefits of converting Traditional IRA to a Roth IRA to lock in lower tax rates on some pre-tax retirement accounts.

1.              Remember that Roth Conversions can no longer be recharacterized so there’s no reversing once executed.
2.              Keep in mind that Roth conversions will be more beneficial when the tax can be paid by funds outside of the IRA.
3.              Remember that all IRA balances are included in the tax calculation of the conversion limiting the ability to only convert after-tax amounts.

•  Maximize contributions to a retirement plan, SEP IRA (self-employed) and Health Savings Accounts.

•  If a beneficiary of an applicable inherited IRA, take any required distributions before end of 2023.

•  If income is expected to increase in the future, consider making Roth 401(k) contributions.

•  Review income tax withholding on retirement account distributions or wages and recommend any needed changes for the new year.

•  Review the timing of income and deductions such as payments for tuition.

•  Consider any changes that may be needed in tax planning if the 2017 Tax Cuts and Jobs Act provisions expire at the end of 2025.

•  Review any changes in income that may result in a paying IRMAA (income-related monthly adjustment amount) increasing their Medicare premiums. Consider ways to reduce income over the IRMAA.

•  Evaluate income as related to tax brackets and net income tax (NIIT) and consider options to lower bracket and NIIT before year end.

ESTATE & GIFT PLANNING

•  Make use of annual exclusion gifts ($17,000 per donee, $34,000 per married couple.)

•  Capitalize on the unlimited gift exemption for direct payment of tuition and medical expenses.

•  Consider gifting to a 529 plan by year-end if saving for a child's or grandchild's education.

1.            Many states offer tax deductions for residents contributing to their state programs.
2.            Consider gifting up to 5 years of the annual exclusion amount to an individual’s 529 plan and filing a gift tax return, electing to treat it as if it were made evenly over a 5-year period.

•  Confirm wills, trusts, and power of attorneys are up-to-date and consistent with current plans.

•  Review lifetime gift and GST gifting opportunities to use additional applicable exclusion and exemption amounts.

•  Consider any changes that may be needed for the estate and gift planning if the 2017 Tax Cuts and Jobs Act provisions expire at the end of 2025.

•  Review client assets to determine if each asset should be held in the client’s name or their revocable trust.

RETIREMENT, INVESTMENTS AND OTHER PLANNING

•  Are there any major life changes such as marriages or divorces, births or deaths in the family, job or employment changes, changes in residency, and significant planned expenditures (real estate purchases, college tuition payments, etc.)?

•  Are pre-tax and Roth contribution amounts to retirement accounts for 2024 updated and accurate?

•  Review various insurance policies and confirm whether the amount of coverage and deductibles are still adequate.

•  Review beneficiary designations and update, as necessary.

•  Confirm that Flexible Spending Account balances have been spent or there is a plan to spend the entire balance and set 2024 contribution amounts.

•  Review the investment portfolio and target asset allocation. Confirm whether the allocation is within the targeted ranges for each asset class as recent market performance could have caused allocations to drift dramatically.

•  Review any scheduled 4th quarter estimated tax payment needs and assess any liquidity for payments.

•  Consider an additional tax payment or increase in tax withholdings to eliminate a penalty or changes in a tax situation for 2024.

•  Evaluate progress towards financial goals and review goals for 2024 and any changes in long term goals.

•  Ask your client if they have reviewed their credit report to identify any concerns.

Year-end planning equals fewer surprises