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  • Writer's pictureHogan Law Office

5 Things to do Before December 31st for your Estate and Financial Plan

Updated: Apr 24

As if you don't have enough to do this month, here are a few things to review for your financial and estate plan before the end of the year.

1. Annual Gifting and Gift Splitting. Take advantage of the annual gift tax exclusion, which allows you to gift up to $17,000 per person per year. This means you can gift up to $17,000 to as many individuals as you wish without triggering gift or estate tax consequences. Additionally, married couples can utilize gift splitting, allowing them to collectively gift up to $34,000 per recipient. Gift splitting is an excellent strategy for married couples looking to maximize their annual gifting and reduce their taxable estate over time without using your lifetime and death exemption amounts. Let's say you and your spouse want to gift money to your adult child. Instead of each of you giving $17,000 individually, you can jointly gift $34,000 to your child without incurring gift taxes. This enables you to transfer wealth more efficiently and take advantage of both spouses' annual exclusions.

2. Required Minimum Distributions (RMDs). If you're 72 or older and have retirement accounts (such as traditional IRAs or 401(k)s), ensure you've taken the required minimum distribution (RMD) for the year, if so required. Failure to take the RMD may result in penalties. The specific amount is calculated based on your age and the value of your retirement accounts.

3. Review and Update Estate Planning Documents. Take the time to review and, if necessary, update your estate planning documents, such as your will, trusts, and powers of attorney. Life events, changes in financial situations, or updates in laws may necessitate adjustments to your plan. Make sure your loved ones know where your important documents are located and who to call in the case of an emergency.

4. Maximize Retirement Account Contributions Most traditional 401(k) plans require contributions to be made before December 31st for that taxable year. Contributions to IRAs, for the most part, can be made up to the tax-filing deadline of such year (ex: April 15th). If you have a small business with no full-time employees (except your spouse), consider opening up a solo 401K or SEP IRA to maximize your ability to make tax-efficient contributions.

5. Charitable Contributions. If you plan to make charitable contributions, consider doing so before the end of the year for potential tax benefits. This could include direct donations, setting up a donor-advised fund, or contributing to charitable trusts. Check the terms of any trusts to ensure that such contributions are not required before the end of the year.

And finally, remember to enjoy the season with friends and family! Happy Holidays!

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