Time for Holiday Cheer And … Year-End Planning

By Mallon FitzPatrick

November 8, 2021 – There is little you can do to quash unwanted tax proposals or quell turbulent market events, but you can take steps to ensure your wealth is fortified against these external forces, synched up to major life events, and primed for growth in the new year.

It’s time again for end-of-year planning—when you sit down with your wealth planner and determine how your circumstances have changed over the year and whether you are still on track to meet your goals.

We continuously monitor and periodically update plans to identify any threats or opportunities trigged by regulatory shifts, tax policies, market performance, or economic, environmental, geopolitical, and global health events.

This is also the time to alert your planner to any major life events, such as a marriage, divorce, newborn, family death, job change, name change, a decline in health, and a recent or potential windfall from an inheritance, business sale or initial public offering.

Don’t let tax changes elude you

You should understand what tax proposals are likely to pass and what actions you need to take before year-end to avoid any unnecessary tax bills.

Proposed tax changes remain unclear as Democrats negotiate a budget reconciliation bill. President Biden recently called for a scaled-back plan that reduces spending from $3.5 trillion to $1.75 trillion. With a $1.75 trillion reduction, changes adversely impacting wealthy individuals are likely to be modified or eliminated.

As of 10/28 the rewrite of the tax proposals eliminated the following: increases in income and capital gains tax, a reduction in the lifetime and estate exclusion amount, limitations to grantor trusts, the changes to Family LLC/LLP gift discounting, and new RMDs for Mega IRAs. High and ultra-high new worth households have a reason to breathe a sigh of relief. Note that the tax situation is fluid and may change after the publication date of this article.

Robertson Stephens will keep you informed of the tax situation as it unfolds and feel free to reach out to us with any questions.

Evaluate Insurance Needs

External events and life changes can trigger the need for new insurance policies. Given recent property value increases and the higher costs associated with labor and construction materials:  Is your homeowner’s insurance adequate to replace the dwelling if it is destroyed?  Do you have enough liability insurance to cover the increase in your net worth likely driven by investment and real estate appreciation? Private client property and casualty insurance may be a solution as it covers a range of issues for multiple homes, personal property, and offers higher liability protection. Maybe you’ve acquired a “risky asset” such as an ATV that should be owned by an LLC and insured separately.

The pandemic has created new risks for us as we contemplate reclaiming our pre-Covid travel itineraries. You may want to purchase “rescue” travel insurance that covers your emergency airlift if you become stranded in a country with a Covid-19 surge.

Pouring over your estate plan

Not all estate planners proactively schedule end-of-year reviews and we encourage clients to evaluate their estate plans with their attorneys, detecting problems before it’s too late and identifying opportunities before they are gone.

This is a good time to review beneficiaries listed on retirement and other accounts. Accounts ownership is often misaligned with the estate plan and may cause issues when the owner passes away. At Robertson Stephens, we simulate the execution of your estate ahead of time to detect any account ownership issues.

You should also confirm that the executor named in your will is still willing and able to execute your state when needed. And depending on your age, you may want to review the directives of your healthcare proxy each year.

Estate planning has also become further complicated by the growing adoption of cryptocurrencies, with evolving strategies to ensure the safe transfer of digital assets to beneficiaries.

Many have learned the hard way that end-of-year planning is not something to shrug off, as budding vulnerabilities may become major liabilities when ignored. You’re a year older. And if you haven’t changed, your environment has. Whatever the case may be, it’s time to have a conversation your planner.

Disclosures

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