Year-end always brings out the planning opportunities for the year ahead. This year is no exception. There are many strategies that you may leverage to better your family in the future.
- Great Opportunity to donate to Charity
- If you are thinking about making a large charitable contribution, 2020 offers an excellent opportunity to do just that. In past years, charitable gifts have been limited by a percentage of your AGI (adjusted gross income). This year (2020), due to the CARES Act, charitable donations going to qualifying organizations are 100% deductible. So, if you do decide to make a large donation, this offers a great opportunity to also lower your overall taxable income for the year.
- Consider a Roth IRA Conversion
- The Roth IRA conversion is a good planning technique to create tax-free income during retirement. It also creates flexibility in your withdrawals in the future. With the potential that tax rates may increase in the future, the Roth IRA conversion is a great tool for year-end planning.
- Review Beneficiary Designations
- This is a good practice to do every year. This year makes planning a little different. With the new SECURE Act and the end of the ‘stretch-IRA,’ you should look at your current designations to make sure they align with your wishes and the new laws.
- Gift to beneficiaries to Reduce Future Estate Tax
- There are many ways to reduce your future estate tax. Many will be needed if new tax law reduces the estate tax exemption. One example is to gift to beneficiaries before year end. You may give up to $15,000 to as many beneficences as you would like each year without paying a gift tax or decreasing your lifetime estate tax exclusion amount. If you are married, you and your spouse may give $15,000 each to one beneficiary. The caveat is that you no longer control that money and should be considered a great Christmas gift!
