Estate Planning
It’s hard to believe 2023 will be winding down in less than two months. Year-end is a great time to review your overall financial situation and make both tactical and strategic moves to optimize your finances for the year ahead. Here are twenty financial planning moves you should consider making at the end of the year: Review Your Budget: Review spending versus income over the last year. Take steps to ensure that your budget aligns with your financial goals. Make adjustments as needed to reflect any changes in income, expenses, or financial priorities. Review Retirement Contributions: Contribute the maximum amount you can into retirement accounts, such as a 401(k), 403(b), and/or an IRA. These contributions can help reduce your Adjusted Gross Income (Read: taxable income) and boost your long-term retirement savings. Tax-Loss Harvesting: Ideally, this is an activity that investors do throughout the year, but at year-end it is particularly important to review your investment portfolio and consider selling investments that have experienced losses to offset gains and minimize capital gains taxes. Contribute to Health Savings Accounts (HSAs): If you utilize a High-Deductible Health Insurance Plan, you are eligible and should contribute the maximum allowable amount to an HSA. Contributions to HSAs are tax-deductible and can be used for qualified medical expenses. Best case scenario, you don’t actually use the contributions in the current year for health expenses, you let them grow. If you use the money in the HSA for qualified medical expenses, the distributions are 100% tax free. The HSA contribution limits for 2024 are $4,150 for self-only coverage and $8,300 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution. Charitable Donations: Make charitable contributions to qualified charity, (501(c) (3) organizations), before year-end to potentially qualify for a tax deduction. Be sure to keep detailed records of all your donations. Take your Required Minimum Distribution(s): RMDs come with a 50% tax penalty if they are not taken in the year that they are required. Legislation such as the Secure Act 2.0 can impact when individuals must begin taking distributions. Be sure to check whether you have taken your distribution before it is too late. Evaluate Your Investment Portfolio: Review your investment portfolio to ensure it aligns with your risk tolerance and any appropriate timeframes. Rebalance or reallocate your portfolio if necessary. Use Your Flexible Spending Account (FSA) Funds: If you have an FSA, check the deadline for using the funds. Spend them on eligible medical expenses, childcare, or other approved expenses to avoid losing the money. HSA money can stay in account year after year, however, a FSA needs to be distributed. Annual Enrollment: Companies often add, subtract or change benefits on an annual basis, and it is important to review what is offered to you through your company’s benefits center. Check Your Credit Report: Request a free credit report and review it for any errors or discrepancies. Correct any inaccuracies to maintain a healthy credit score. Re-visit Financial Goals: Establish or update your short-term and long-term financial goals.Having clear objectives can help you stay focused and motivated. What do you want to accomplish this year? In 5 years? Estate Planning: Review your estate plan, including wills, trusts, and beneficiary designations. Ensure they reflect your current wishes and circumstances. It is also important to periodically engage with your Financial Advisor and Estate Planning attorney to see if any law changes will impact how your wishes will be carried out. Set a meeting with a Financial Advisor: If you have a financial advisor, schedule a year-end meeting to review your financial plan, investments, and make any necessary adjustments. Evaluate Insurance Policies: Review your insurance coverage, including health, auto, home, and life insurance. Ensure you have adequate coverage and make any necessary changes. Maximize Tax-Advantaged Accounts: Contribute to tax-advantaged accounts like 529 college savings plans or Coverdell ESAs for educational expenses, and ABLE accounts for disabled individuals. Plan for Bonuses: If you expect a year-end bonus or profit-sharing, create a plan for how to save, spend or invest these funds wisely. Consider Roth Conversions: Evaluate the potential benefits of converting traditional IRA funds to a Roth IRA, which can provide tax-free withdrawals in retirement. Evaluate Debt: Review your outstanding debts and create a strategy to pay down high-interest debts more aggressively if possible. This ties in with annual budgeting and can help to improve your overall financial fitness in the new year. Secure Important Documents: Organize and store important financial documents in a secure location, and ensure your loved ones know how to access them. Update Beneficiary Designations: Review and update beneficiary designations on all investment, checking, savings, retirement accounts, insurance policies, and other assets to ensure they reflect the overall plan that you have in place. One piece of advice – Don’t wait until the last minute! Just as many of us get busy with things like holidays, family, or travel, financial firms also get very busy. Any transactions whether it is a gift, contribution to an IRA or an RMD distribution, it’s best to do it sooner than later. Consult with a financial advisor or tax professional to help you make the right decisions based on your specific financial situation and goals. Year-end financial planning can help you start the new year with a new feeling of financial control and confidence. This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment, tax or legal advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and is subject to change without notice. Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website .
One of the major problems that occur with preparing for one’s passing and financial distribution is that people frequently leave the matter to the very last minute and then make rushed decisions with bad information. This can cause common mistakes to occur that could be avoided with proper preparation. Every financial professional will be quick to say a good financial portfolio includes planning for one’s estate distribution after they pass, but it can frequently sound like a foreign language to others not as familiar with estate planning.  If you are able to, consider dedicating some time now to working on your legacy plan. Here are a few ways in which you can better avoid major estate planning mistakes.
Estate planning matters whether you’re 32, 62 or 92 years, though for many it can be overwhelming both not knowing where to start or what to prioritize. Surely, we all know people that spend countless hours planning their next vacation or agonizing over where they are going to dine out this weekend, yet the thought of outlining their final wishes gets little attention.  At Breakwater Capital Group, it’s safe to say, we feel that having a plan to protect our interests and our loved ones is quintessential. Leaving this to chance or neglecting it all together can cost those left to pick up the pieces both time and money. Not to mention, other unintended consequences, which may have been avoided or minimized had we put in the effort. To be clear, you don’t need a fancy house or a sizable net worth to have an estate plan. And even if you haven’t accumulated much yet, it may actually mean there is an even greater sense of urgency in establishing a plan earlier in life depending on your circumstances. We put together a list of 8 key elements that are a part of a basic estate plan, with the hope this is quick education and a little nudge. Here goes: 1. Will – A will is a legal document that outlines how your assets and property should be distributed upon your death. It allows you to name beneficiaries, appoint an executor to handle your estate, and designate guardians for minor children, if applicable. This is the backbone of your estate plan. 2. Power of Attorney: A power of attorney grants someone you trust the authority to make financial or legal decisions on your behalf if you become incapacitated or unable to manage your affairs. There are different types of power of attorney, such as a durable power of attorney, where the appointed agent can act on your behalf without conditions or a springing power of attorney, which becomes operative with a triggering event, like a doctor’s note indicating diminished capacity. You can appoint a power of attorney at any age though it’s more common with the elderly, just make sure you trust your appointee. 3. Healthcare Proxy or Medical Power of Attorney: This document designates someone to make medical decisions for you if you are unable to do so yourself. It allows you to specify your healthcare preferences, such as end-of-life care or organ donation. It’s important to have a discussion with the trusted individual who will serve in this capacity. 4. Living Will: Also known as an advance healthcare directive, a living will expresses your preferences regarding life-sustaining medical treatments and interventions if you are in a terminal condition or persistent vegetative state and cannot communicate your wishes. This may be tucked into your Healthcare Proxy or may be a standalone document. 5. Trusts: A trust is a legal arrangement in which you transfer assets into an entity expressly created for a certain purpose. The trust has three key players, the roles can be handled by the same individual serving as all three or may have three different parties. Grantor/Donee: The individual that funds the trust. Trustee: The individual responsible for the administration/management of the trust. A trustee is a fiduciary, whose duty of care is to the trust’s beneficiary. Beneficiary: The person(s) that stands to benefit from the trust, they may have an income interest or access to the trust’s principal for certain purposes Trusts come in all shapes and sizes, they can help avoid probate, provide privacy or asset protection, allow for more control over the distribution of assets and help minimize taxes in some instances. Common types of trusts include revocable living trusts, irrevocable trusts, and testamentary trusts. 6. Beneficiary Designations: Certain assets, such as life insurance policies, retirement accounts, bank and brokerage accounts, allow you to name beneficiaries who will receive those assets directly upon your death. Ensuring that beneficiary designations are up to date is an important part of estate planning. An inexpensive solution for who gets what. 7. Guardianship Designations: If you have minor children, it is crucial to name guardians who will care for them until they reach the age of majority, should you pass away or be incapable of caring for them. Oftentimes there is a section in the will devoted to custody or guardianship, though it may also be a standalone document. 8. Letter of Instruction: While not legally required, a letter of instruction can provide guidance to your loved ones regarding your funeral arrangements, the location of important documents, passwords, professional contacts like your wealth advisor, attorney, and tax accountant and other details that may not be covered in formal legal documents. Every estate plan is by definition unique, just like our DNA or fingerprints. That said you may opt for some basic documents and simplicity or look to create a more highly individualized approach depending on your circumstances, goals, and applicable state laws. This isn’t meant to be “here’s a to do list, you’re on your own”. We are here to help as we have traversed this topic frequently over the years and we can offer helpful insights. As you begin working with your trusted wealth advisor, we’ll start by identifying your priorities and frame an outline of what that plan may look like. That way you are prepared for a more fruitful discussion when you formally engage with an estate planning attorney to start ironing out the specifics and implementing the plan. Being better prepared and likely saving a couple dollars along the way, seems like a good use of your time.…