5 Areas of Year-End Opportunity
As December 31, 2013 nears, the opportunity presents itself to consider planning and investment steps that “expire” at year-end. The following list includes a few examples. Note that Payne Wealth Partners has a robust service set to address these areas in relation to each family’s specific situation and is actively doing so with our clients receiving investment management and wealth planning services.
- IRA related
– Ensure 2013 required minimum distributions (RMDs) for IRAs and inherited IRAs are distributed as necessary. Failure to do so creates a harsh penalty of 50% of the RMD!
– Is a Roth IRA conversion desired for 2013?
- Investment strategy
– Sell loss position securities to offset against previously recognized gains and/or mutual fund capital gain distributions before year-end. Some investors have a hard time selling investments that they hold at a loss. However, there are benefits to selling those securities, or at least the tax lots that are held at a loss, and lowering your tax liability. This is a commonly used strategy at year-end and is often combined with re-balancing the portfolio and a careful eye to Wash Sale rules.
– For those expected to be in the 15% or lower marginal federal income tax bracket in 2013, sell securities with long-term gains and pay zero federal income tax.
- Estate tax planning
– Should you utilize your annual gifting exclusion ($14,000 per donee, $28,000 if “gift splitting”)?
- College savings
– Does contributing to an Indiana College Choice 529make sense in order to secure a state tax credit up to $1,000?
- Charitable planning
– Is there an opportunity to use appreciated securities (in high stock market) to help a favorite charity? Generally, you can deduct the market value of your donated securities while also avoiding capital gains.
– If you are charitably inclined, does a Charitable IRA Rollover fit your 2013 tax planning?
To our readers who are not receiving proactive advice from their advisor regarding these strategies a word of caution- the rules surrounding many year-end strategies can be complex. Working with a qualified professional with the time and attention needed to ensure the correct steps are taken for your situation is critical.
Note that this is not an all-inclusive list as other strategies beyond the scope of this communication (such as a 5-year lump-sum gift to your 529 or employing certain wealth transfer techniques) are not discussed.
Please accept best wishes for your Holidays from all at Payne Wealth Partners and our hope that something in this list proves helpful to your year-end planning.