Year-End Estate Planning Checklist: Maximizing Your Financial Health

As the year draws to a close, it’s the perfect time to review your estate planning and financial strategies. Taking a proactive approach can help you optimize tax-saving opportunities, maximize gifting allowances, and ensure your estate plan reflects your current wishes. At Crosswhite Law, we recommend an annual checkup of your financial and estate planning strategies, including considerations for gifting, charitable contributions, retirement planning, business succession, and overall estate management.

Annual Gifting Exemptions: Use It or Lose It

The annual gift exemption allows individuals to gift a certain amount each year without incurring gift tax or needing to file a gift tax return. For 2024, the exemption is $18,000 per person, with a married couple able to gift a combined $36,000 per individual. This exemption is adjusted annually for inflation and will increase to $19,000 per person or $38,000 per couple in 2025. However, this exemption does not carry over—any unused portion expires at year-end. Annual gifting is particularly beneficial for individuals with estates exceeding the federal estate tax exemption. Gifts can be made directly to individuals or directed to trusts, custodial accounts for minors, or educational accounts such as 529 plans.

Direct Gifts for Education and Medical Expenses

You can also make gifts for medical and tuition expenses without reducing your annual gift exemption, as long as these payments are made directly to the healthcare provider or educational institution. By paying these expenses directly, you preserve your annual exemption while still providing meaningful support to your intended beneficiaries.

Charitable Contributions and Tax Benefits

Year-end is an excellent time to review your charitable giving strategies. While cash donations are common, consider gifting your Required Minimum Distribution (RMD) from retirement accounts to charity. Although you won’t receive a charitable donation credit, the gifted amount is excluded from taxable income, which can be advantageous if you cannot itemize deductions. This strategy allows you to support your preferred charities while reducing your taxable income.

Review and Update Your Estate Plan

Estate planning is not a one-and-done task. Life events such as changes in assets, marriage, divorce, or the birth of a child can significantly impact your plan. We recommend reviewing your estate plan at least once a year to ensure that it still aligns with your wishes. Confirm that your fiduciary appointments are current, including the individuals chosen as trustee, executor, or power of attorney. If there have been significant changes to your assets or beneficiaries, an update may be necessary. Additionally, legal changes may provide new opportunities or require revisions to your documents. Consulting with an experienced estate planning attorney can help you identify any needed adjustments.

Year-End Tax Planning Strategies

Tax planning is a critical component of your overall financial health. Here are some effective year-end strategies:

Maximize Retirement Contributions
Ensure that you’ve made the maximum allowable contributions to your retirement accounts. Contribution limits are adjusted annually for inflation, and individuals over age 55 may be eligible for additional catch-up contributions. Taking full advantage of these contributions helps you defer income taxes and build your retirement savings.

Required Minimum Distributions (RMDs)
If you are 73 or older, you must take RMDs from your retirement accounts. These distributions are treated as ordinary income and can push you into a higher tax bracket if not planned for properly. Failure to take your RMD or the full amount can result in a steep penalty of 50% of the RMD amount not taken. It’s essential to review your RMD requirements to avoid unnecessary penalties.

Roth IRA Conversions
Converting a Traditional IRA to a Roth IRA allows you to pay income taxes on the converted funds now rather than later when you withdraw them. This strategy is often advantageous when markets are down, but it requires careful analysis to determine whether it is beneficial for your specific financial situation. An estate planning attorney or tax advisor can help you evaluate the potential advantages and tax implications of a Roth conversion.

Tax Loss Harvesting
If you have unrealized losses in your investment portfolio, you can use them to offset any realized gains through tax loss harvesting. This strategy can help reduce your overall taxable income. However, limits apply to the amount of losses that can be claimed. A knowledgeable estate planning attorney or tax advisor can guide you through this process and help you maximize your tax savings.

Trust Crosswhite Law for Your Year-End Planning Needs

At Crosswhite Law, we have extensive experience assisting clients in Statesville, Iredell County, and surrounding areas with all aspects of estate planning. Our attorneys are skilled problem solvers who understand the importance of regular reviews and updates to your estate plan. By taking a proactive approach, we help ensure your plan continues to meet your needs, reflect your current wishes, and take advantage of new legal opportunities.

If you have questions about your estate plan or need assistance with year-end financial planning, our experienced attorneys are here to help. Contact Crosswhite Law today to schedule a confidential consultation at (704) 445-3085 or complete our online form.