Planning Ideas to Consider as 2019 Winds Down
We tend to blame a lot of things on the weather – aches and pains, disrupted sleep schedules, longer than normal commuting times, etc. The list goes on. My experience tells me that the rush to dig into financial planning in the last quarter of the year is also related to the weather. Maybe the colder temperatures give everyone’s brains a little jolt because questions about optimization strategies increase dramatically with the change from fall to winter. As if this time of year isn’t busy enough, here are several year-end planning-related ideas to consider as 2019 winds down:
Reflect on the tax law changes
We have one tax season under our belts related to the Tax Cuts and Jobs Act. If you didn’t have a discussion about your 2018 tax returns with your CPA or tax preparer yet, make that a priority. This may also be a good time to request a multi-year tax projection to model out Roth conversions, bunching of charitable contributions, etc. Projections that look out one year are good. However, ones that cover three to five years are great!
Review your estate plan
Be sure that your estate planning documents are up to date. Rather than just reviewing your will, also review your power of attorney, health care documents, and any trust agreements. See that the beneficiary designations are in line with your desires. Prepare a flowchart of your current estate plan. Visualize what would happen to each of your assets and how the current estate tax law will impact you. It’s important to consider state estate taxes as well if you are a resident of a state that imposes estate taxes on the state level.
Plan for today
It is critical to have a plan in place for who will handle your financial affairs should you suffer cognitive decline. Making sure your spouse and/or family understands your plans will help reduce future family conflicts. Planning also ensures your wishes are considered.
Gut-check your cash reserves
Do you have enough cash to cover living expenses for some period of time so that you do not have to sell equities in a down market? Working clients should aim for six months of living expenses in cash. Retired clients should target 18 months. Given the current interest rate environment, it’s also important to shop around for the best savings or money market rates for this cash.
It is always a good idea to periodically review your insurance coverages across various areas. Consider comparing your current homeowners, auto and umbrella coverage against alternatives. Don’t just review insurance with the company you use now. Compare coverage with a few other companies, too. It’s healthy to do this every couple of years and can most easily be done with the help of an insurance broker. Other areas of risk management that may need to be revisited include life, disability and long-term care insurance.
Fund future education
Often, funding a 529 college savings plan comes with tax benefits. Thus, making contributions before the end of the year is key. If you have already contributed to 529 plans, make sure the asset allocation of those plans makes sense given the students’ ages and proximity to college age. Accounts for students already in college or starting within the next two years should be in a very conservative or cash position.
The best part of these planning to-dos is that almost all of them can be done throughout the year. Some decisions are most beneficial if made nearer the end of the year when other pieces of the puzzle have been put in place. However, there are so many initiatives falsely pigeon-holed only as “year-end” to-dos. If you can’t focus on these between now and December 31, we’d suggest prioritizing right away in 2020. We’re here to help you with these to-dos. Reach out to schedule a meeting today!
Thank you to the Personal Financial Planning section of the AICPA for help in preparation of this post.
Laura Bereiter, CPA, PFS™, CFP® joined White Oaks Wealth Advisors in October 2015. She offers comprehensive wealth, tax, and estate planning to the firm’s clients.