Take Time Over the Table to have Real Conversations
The last three months of the year are typically spent with family over the holidays. While it can get hectic, they are great opportunities for families to connect.
If the opportunity presents itself, we highly recommend families take this time together to talk about some of the most important things in their life and start the discussions of wealth and future planning.
We have a few great resources that can help, and here is a nice article that might help jumpstart the conversation.
If this has been on your list of conversations to start having, please do not hesitate to reach out and we’d be happy to share some of our own personal success stories or conversations we have had with our families, and why it’s important to talk about wealth and future planning before it’s too late.
Year-End Tax Planning
As we wrap up 2024 here a few year-end planning considerations to take into before the end of the year.
- Tax Loss Harvesting – Selling an investment that has gone down can improve your tax situation as losses can be used to offset other gains and income. The sales need to be completed before December 31st for the loss to be included in this year’s tax return. The rules around losses allow you to use losses to offset any realized gains you have for the year. In the event you have more losses than gains, you are allowed to use up to $3,000 of those losses to offset any ordinary income. If you have more losses after that you can carry forward those losses into next year (and if you have them) to offset next year’s gain and again up to $3,000 of next year’s income.
- Qualified Charitable Distributions – For those who are over 70 ½ and have pre-tax IRA assets, you can make a distribution directly from your IRA to the charity and it will be considered a tax-free distribution from your IRA. The IRS limits you to $105,000 worth of distributions per year and you need to be 70 ½ at the time of the distribution. The nuance to this transaction is that you need to track the distribution for your records. The 1099R, which reports distributions to the IRA, will show your charitable payment, however you will want to note that it is not taxable on your tax return. If you happen to be in the RMD phase of your life, this will count against your required minimum distributions as well.
- Charitable Giving – If you would like to make a gift to charity, that gift needs to be completed and received by the charity by December 31st.
- Donating Appreciated Stock – This can be a very tax efficient way to avoid paying tax on the gain of an investment. You must have held the investment for more than one year and transfer the shares of the investment directly to the charity of your choice. By transferring the shares, the charity receives the appreciation of your investment, you receive credit for the full value of the gift, and the charity can sell the investment and avoid paying any capital gains tax on their received gifts.
- Cash Gifts – This year many of our clients have investments with unrealized losses. In this case, it makes sense to sell those investments and realize the loss and pay cash to the charity. As detailed earlier, you can use those losses to eliminate other realized gains or income.
- Roth Conversions - Converting funds in your Traditional IRA to a Roth IRA can be a very effective strategy to grow tax free wealth. There are several factors to consider doing so, such as IRA size, current income or tax bracket, source of funds to pay the conversion tax, and investment strategy in the Roth going forward. Once those factors are considered, if you would like to have that conversion counted towards this year tax year, it needs to be completed before December 31st.
- Establish your Donor Advised Fund – If you have a history of giving or want to build a legacy of philanthropy, setting up a donor advised fund can be a great way to make a sizeable charitable contribution, then make periodic recommended donations to your charities. We have found contributions to donor advised funds can be paired with other tax planning situations, such as a sale of a business or sizeable Roth conversion that could create a sizeable tax impact. In turn, your donor advised fund can allow your family to make much needed impact on local charities by making gifts that can last for years.
In addition, here is a link to our year-end planning video and article by Baird’s Director of Advanced Planning – Tim Steffen.
If you would like to discuss donor advised fund options, feel free to reach out to our team.
BVB Group Spotlight
Continuing to build our knowledge and skills is key to growing our business and supporting our clients. We are thrilled to recognize Jennifer Ewert earning the Chartered Financial Consultant Designation.
With this designation our team now has six advanced designations to support you and your wealth management needs. The BVB group currently holds a JD, three CFP® designations, one CPWA® a CDFA®, and a ChFC®.
If you want to know one key ingredient to the BVB Group’s secret sauce, is our desire to learn and grow.
Below are a few links if you want to learn more about the designations and their focus.
https://www.cfp.net/get-certified/certification-process
https://investmentsandwealth.org/certifications/cpwa-certification
https://institutedfa.com/about-cdfa-course/
https://badges.theamericancollege.edu/group/235093
Investing in an Election Year
The 4th quarter is going to be filled with more news and noise around the election than I’m sure you can imagine and all of it won’t make a difference for the market or your finances.
During these years we want to revert back to the data and highlight, that at the end of the day the market is apolitical and making a short-term decision can have a severe impact to your long-term plan.
Here is a recent article and video highlighting impact of elections on the market:
In addition, many clients are interested in what Baird’s Washington DC Strategists are seeing with this election. Late Summer, Dan Clifton, Partner and Head of Policy Research at Strategas hosted an event that highlighted the current race.
While Baird does not offer tax or legal advice, our Financial Advisors regularly work with clients’ attorneys and tax professionals to help ensure that all phases of wealth management are addressed. Please consult your legal or tax professional for specific information.