Tax Planning Your Estate – 5 Tasks to Complete Before the End of the Year

With the arrival of Fall, the end of 2021 is fast approaching. Tax planning is especially important this year with legislation on the horizon that may soon reduce estate tax exemptions, while raising capital gains taxes and taxes on those who earn more than $400,000 per year.

At the end of every year, Sacramento Area estate planning lawyers suggest looking over your legal and financial documents to ensure that changes do not need to be made.

This may be the case if you have experienced any significant life changes such as marriage, divorce, birth of a child, retirement, purchase or sale of property, purchase or sale of a business, etc. In addition, it is wise to evaluate whether there are any last-minute moves you can make to reduce your tax burden. 

While it may feel overwhelming, our Sacramento Area tax planning attorneys recommend the following steps to start the process of getting your end-of-year “ducks in a row:” 

• Revisit your Will or Trust: Now is the time to review your documents and make sure they are up to date and still reflect your current wishes. Remember, these documents are not just about who gets your stuff after you pass. Estate documents also include your wishes to help direct your family should you become incapacitated and cannot express yourself.
• Review your Power of Attorney: Did you know that a financial Power of Attorney can go “stale” after a few years? By keeping your documents up to date, you can be confident that your directives will not be rejected by banks or other financial institutions. If it’s been a few years since you’ve had your POA refreshed, call your lawyer.
• Update beneficiary designations: The beneficiary designations on your financial accounts, IRA, 401 (k), retirement plans, and life insurance policies can remain the same for years without being changed. However, who and how you want your money inherited might have changed since opening the account. By keeping the named beneficiaries on these types of accounts current, you can ensure you are not leaving money to an ex-partner or leaving out your newest grandchild. Remember the named beneficiaries supersede what is in your will. It is worth the peace of mind knowing your named beneficiaries are who you want. Call the human resource department at your company or your insurance agent to ensure these designations are correct going into 2022!
• Reduce the value of your estate with gifts: In 2021, you can give away $15,000 to as many people as you want tax-free. And this is in addition to 2021’s lifetime gift tax exemption of $11.7 million for singles and $23.4 million for a married couple. This is an excellent option for those looking to reduce their tax burden at the end of the year. Cash gifts are a very merry way to say you love someone while also making a smart tax move.
• Talk to your loved ones about long-term care: The holidays are a time for family to come together, and while we need to do it carefully during the pandemic, you may see people that you haven’t gathered with in a while. While talking to your loved ones, be aware if they seem to be struggling as they age. Just observe and listen to them; after the holidays, it may then be time for discussions. Educate yourself and your loved ones about the best options to support your loved one medically, emotionally, and financially. Then meet with your attorney to take advantage of other planning strategies to protect assets while still accessing quality care as your loved one ages. 

Of course, if you have any questions that pop up while reviewing your documents or you have revisions to your current documents that need to be made, call 800-244-8814 to schedule a meeting with our experienced estate planning attorneys. Then you can start the new year with your legal ducks in a row, knowing that you and your family are protected.

If you have any further questions about asset protection planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at our California asset protection office at 800-244-8814 to set up a consultation.