Year-End Money Moves to Make Now, According to Financial Advisors


For people who are in their 70s, use your family’s holiday gathering to discuss your end-of-life wishes. Walk the kids through who your healthcare power of attorney is, what your planning desires are. It might be, “We want to age in place, and we’re going to move to a retirement community in 10 years.” It’s an opportunity for everybody to sit down and have a conversation about what your plans are as an aging parent so that your kids have transparency. They can ask questions and make sure that what you want to have happen will happen. You need to have those conversations, but we all live scattered lives, and I don’t think it’s something you want to do by Zoom. And it’s not something you should ignore because your kids might be anxious about it.

Also, use your family’s holiday gathering to preserve family stories from all generations.

StoryCorps is a great way to capture those memories, and you can keep it private if you want, but you can also make it part of the public archive. To me, that’s part of planning. We all have our financial capital, but we also have our family capital. And our family capital is partly stories and values and culture.

On a more practical note, if you’ve had a high medical-expense year, consider an IRA distribution that’s above the required minimum to fully utilize the lower income-tax bracket that deducting all those expenses likely put you in. And if you don’t need the funds, convert them to a Roth IRA for your kids.

Harvest Those Bond Losses

Patrick Fruzzetti, managing director, Rose Advisors (Hightower)

We’re reminding clients that for the first time in years, you can now use bonds for tax-loss harvesting because of their recent losses.

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In terms of gifting, for clients who are in the age range for required minimum distributions, making a qualified charitable distribution can be wise. [QCDs allow individuals age 70½ and older to donate up to $100,000 from an IRA directly to a charity, reducing taxable income.] Also, beginning this year, individuals over age 70½ can fund a charitable remainder trust with a one-time $50,000 contribution from an IRA. The biggest benefit is that you’re not paying income tax on the distribution, while you’re still fulfilling the annual distribution requirement. That’s huge, and you’re also satisfying a charitable commitment.

We’re also educating clients on things like donor-advised funds and are always reminding them to consider donating appreciated assets, such as appreciated stock in particular, especially when you have positive years like we’ve had this year.

In addition, people sometimes forget annual gifts. Be sure to get them out to children or other family members. [The 2023 gift-tax exclusion of $17,000 per recipient can go to an unlimited number of recipients.]

Double Up on 529s

Matthew Spradlin, wealth manager, Godfrey & Spradlin, Private Wealth Advisory of Steward Partners

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By opening two 529 plan accounts for each child, one for each parent, you can often double the amount of state tax deduction. The rules in each state are a little different, and some don’t allow this option. But for example, I’m in Virginia, where each individual gets up to a $2,000 income-tax deduction for contributions to a 529. Using myself as an example, we have a 9-year-old son, so we have a 529 in my name, and we have a 529 in my wife’s name. She’s the owner of hers, and I’m the owner of mine, both with our son as the beneficiary. So we get to double up those deductions to get a $4,000 state tax deduction. And you can front-load a 529 for up to five years’ worth of the annual gift exclusion. In 2023, that’s $17,000, so up to $85,000 for individuals or $170,000 per couple, per child or beneficiary.

Another piece of advice I’m giving is to create what’s called a Uni-K plan [also known as an individual 401(k)] for 1099 sole proprietors. You may be able to take advantage of the 2023 contribution limits—$66,000 plus a $7,500 catch-up contribution if you’re over age 50—by contributing as both employee and employer. The contribution limit for 2024 will jump to $69,000 plus the potential catch-up contribution. I have a client who’s earning $750,000 in annual income as a consultant. We’re fully funding the Uni-K, and he’s doing it as a pretax contribution. You can also do after-tax contributions to a Roth-type Uni-K. In either case, you cannot have any employees except for your spouse. And as always, you should consult both financial and tax advisors.

Give With Expectations

Indrika Arnold, senior wealth advisor, The Colony Group

When we talk to client families of multigenerational wealth about family gifting, we review the capacity to gift. But the conversation also includes gifting with a purpose and discussing expectations around the gift. We share a book with our clients called The Cycle of the Gift: Family Wealth and Wisdom. It talks about the intent of the giver and also the spirit with which the receiver receives it.

Say we have a client who makes an annual gift every year, who’s going to write a $17,000 check to each of their children. It could happen automatically, and the children may just expect the gift to show up. There’s no connection there in terms of what the gift is for. But having a meeting between the giver and receiver can allow the giver to express what the intent of the gift is and what they want to come out of it. The gift isn’t merely a tax write-off [aimed at taking advantage of the annual gift-tax exclusion].

We work with one family that regularly makes significant gifts to their children. We facilitate family meetings where they share information with each other about how they’re using their gifts. The parents have set expectations, and every year they check in and get a lot of joy by seeing what comes out of the gifts they’ve made. We have another client who gives a certain amount every year to support a family member’s education. We asked her if she had thought about getting feedback from the student about how they are doing in school, and she said she hadn’t. We now hear from her about how the student pays regular visits to tell her all about what’s going on in school. That conversation makes the gifts more meaningful to the giver and the receiver.

Mind Those Mutual Fund Distributions

Mark Mumford, managing director, Hollow Brook Wealth Management

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If you own mutual funds or ETFs, go through and look at what the potential capital gains distributions are going to be. A lot of those funds do have appreciated securities, given that we’ve had a fairly strong bull market over the past 14 or 15 years. Even in down years like last year, a lot of these active strategies are still producing capital gains. Also be mindful if you’re contemplating adding to a mutual fund that’s going to make a sizable capital gains distribution: Doing so over the last couple of months of the year can be tax inefficient.

I also suggest reviewing your investment results in the context of your overall objectives and financial plan. While it’s really convenient to review performance on an annual basis, I encourage clients to judge results over long periods to appropriately frame progress toward meaningful, longer-term goals.

Finally, using the annual gift-tax exemption and giving appreciated securities can be a powerful way to build a portfolio and do generational or legacy planning. And you don’t need to be an ultrahigh-net-worth individual to do that. Depending on who you’re gifting it to, there could be a tax arbitrage opportunity: Maybe the recipient is in a lower bracket than the one you would be selling the securities at. And you could even use some of next year’s gift exemption to help that child pay for the capital gains.

Email: advisor.editors@barrons.com



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