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Year-End Financial Planning Tasks to Consider Thumbnail

Year-End Financial Planning Tasks to Consider

By: Kelly Brothers

2020 has been a year for the history books, which means the “financial planning task list” for the end of the year has grown. 

The tried and true planning options remain: tax loss harvesting, Roth conversions, annual gifting.  But in addition, this year Covid and the election have provided some “one time only” options.    Most people know they don’t have to take an RMD (Required Minimum Distribution) this year.  But, that doesn’t mean you shouldn’t, especially if you can take money out at a lower tax bracket.  Also, due to Covid, some 401k plans allow you to take up to $100,000 out of your retirement account without penalty and with taxes stretched over 3 years. 

 The “split-roll tax” did not pass in California, but Prop 19 did pass.  One of it’s features severely limits your ability to transfer property, without triggering a reassessment of the property tax.  Of course, if you transfer a vacation home to your kids, you also transfer the basis to them.  So, when you work through all the scenarios, if you plan to transfer a vacation home to your kids with the intent that it would not be sold, but stay in the family for generations, you may want to consider gifting the property to the kids before February 15, 2021, which is the deadline.  After that date, any transfer could trigger a reassessment for property tax purposes.

 For couples who have a net worth north of $10 Million, you might want to consider strategies to use the current Lifetime Gift Exclusion, which is now almost a “use it or lose it” proposition.   Currently (in round numbers), we each have an $11.5MM exclusion, or $23 MM for a couple.  Everything above that would be subject to an Estate tax.  But, President-elect Biden has stated he would like to drop that number to $2.5MM to $3.5MM per person.   And if he doesn’t get his way, the current law will “sunset” anyway to the end of 2025.  There may be a few years to use the gift exclusion before it is decreased substantially…. And there are ways to gift assets to kids, but retain full control.  You may think that doesn’t apply to me, but when you look out 15-20 years and add up your investments, the value of your real estate, and any life insurance, the numbers can climb quickly.

Many of us would love to see 2020 in the rear-view mirror, but don’t fail to take advantage of planning opportunities that may be “history” with the turning of a calendar page. If you have any questions or would like to talk with a financial advisor, please call us at (916) 924-7527 or complete our financial advisor consultation form.


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