4 Ideas for Year-End Planning
The end of the year is great time for reflection and relaxation, particularly during the holiday season. It’s also a great time to do a little bit of planning.
Below, I offer readers four ideas for high impact planning you can do in the coming weeks, spanning estate planning, investing, taxes, and more.
1.
Use the Holidays to Discuss Estate Plans with Your Family
The holidays can create a constructive setting for families to gather and discuss financial and estate plans. These conversations are crucial, as there have been numerous studies showing that the biggest risk to family wealth over generations isn’t estate taxes or market risk—it’s family discord. According to the Williams Group, a breakdown of communication and trust account for 60% of wealth transfer issues[i].
The holidays can sometimes create unique opportunities where multiple generations of a family are together in a relaxed and positive environment (at least that’s the hope!). This environment can help facilitate an open dialogue about inheritances, roles, family values, charitable giving, and other elements of the family’s legacy. Questions should be encouraged, and the conversation should remain constructive. If issues come up and do not require immediate action by year end for tax or other purposes, we’d advise the family to make a note of the issues and revisit them at a later date. In our view, the holidays are a good setting for having productive conversations—not for resolving all the issues.
It is often said that the final step in creating an estate plan is to “communicate the plan,” which can help families gain a clear understanding of end-of-life plans, how wealth is set to be transferred, and why. These conversations are not always straightforward or easy, but we think they’re critical for maintaining family unity. The holidays may be a good time to do the communicating.
2.
Remember that Qualified Charitable Distributions (QCDs) Allow Eligible IRA Owners to Give More, Tax Free
IRA owners age 70½ and older can make up to $105,000 in tax-free charitable donations during 2024 through qualified charitable distributions (QCDs). For those age 73 or older, qualified charitable distributions QCDs also count toward the year's required minimum distribution (RMD).
Generally, IRA distributions are taxable, but QCDs remain tax-free if sent directly to a qualified charity. To make a QCD for 2024, IRA owners need to ensure the transaction completes by year-end, and it is important to notify your CPA/tax preparer of the charitable donation. Brokerage firms do not issue special tax reporting for QCDs.
Each eligible IRA owner can exclude up to $105,000 in QCDs from taxable income. Married couples, if both meet qualifications and have separate IRAs, can donate up to $210,000 combined. QCDs don’t require itemizing deductions.
For those planning ahead, starting this year, the QCD limit is subject to annual adjustment, based on inflation. For that reason, the annual QCD limit will rise to $108,000 in 2025.
3.
Consider the Tax Saving Possibility of Contributing to Retirement Accounts and HSAs
Not everyone is eligible to contribute to the accounts below, and in some cases, contributions may not be fully tax deductible. If you have questions about your eligibility, please contact us directly so we can help.
To note, the contribution limits below are for 2024. For IRAs and HSAs, you have until Tax Day 2025 to make your contributions for 2024. For employer-sponsored retirement plans, the deadline is December 31, 2024.
4.
Don’t Rule Out Itemizing Your Deductions
If you are a single filer and your deductions exceed $14,600 in 2024 (or $29,200 for married couples filing jointly), it could make sense to itemize instead of claiming the standard deduction. Some common deductions to factor into this decision could be:
Medical and dental expenses over 7.5% of your adjusted gross income
Personal property taxes, real estate taxes, and $10,000 of state and local taxes
Home mortgage interest
Gifts to a qualified charity (non-QCD)
Personal casualty and theft losses from a federally declared disaster
If you do ultimately decide to itemize your deductions, just be sure to keep records for each expense and verify with a tax professional that your expense is deductible.
One Final Planning Note for Medicare Recipients
The Department of Health and Human Services has announced the 2025 IRMAA income brackets and full Part B surcharges and premiums. The table below gives readers quick reference to total monthly premium amounts based on adjusted gross income:
I hope you find these ideas useful and welcome any questions you may have. From myself and the rest of the RSMA team, we wish you a safe, healthy, and happy holiday season with your family. Enjoy this time and let us know if we can help you in any way.
Thank you for your continued confidence in RSMA Wealth Management, and we look forward to continuing to serve you in 2025.
(i) Source: J.P. Morgan, “Communicating Your Estate Plan with Family,” November 18, 2024.
(ii) Source: IRS, Qualified Charitable Distributions, November 14, 2024.
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