Ready for Year-end?

Published: December 15, 2021

With the end of the year in sight, you may be wondering if you have taken care of those financial items that have a December 31st deadline. Now is a good time to check any outstanding items off your list. To help you with this, Klingenstein Fields Advisors (KF Advisors) has five tips for you and your family. 
 
Take advantage of tax-deductible or tax-free earnings accounts. There are very few tax-advantaged ways to save these days, but individual or corporate retirement and health savings accounts (HSA) are an effective way to save and reduce your tax burden. Your contributions are typically made pre-tax and grow tax-free. Your company may even provide a matching contribution for your retirement account or a fixed contribution to your HSA to encourage health and wellness. For 2021, the 401(k) plan maximum contribution is $19,500, with an allowable additional catch-up contribution of $6,500 for those over age 50. The 2021 HSA maximum contribution is $3,600 per individual ($7,200 for a family), with a $1,000 catch-up provision for those over 55. If you have not funded all of your potential contribution, talk to your employer as soon as possible. You may still be able to make a lump sum contribution before the end of the year if your payroll processor allows.
 
Don’t forget charitable contributions. For 2021, the CARES Act provision that allows individuals to donate up to 100% of adjusted gross income was extended. Any contributions above the normal IRS limit must be made in cash and given to a recognized public charity. If you have a special cause you want to support, this is a great opportunity to increase your giving and enjoy the tax benefit.  
 
Give to your loved ones. You can use your annual gift tax exclusion to begin passing on your legacy and use up your lifetime gift tax exemption amount. For 2021, the annual gift tax exclusion amount is $15,000 per recipient, per giver (for 2022, the amount goes up to $16,000). If you are married, you can make a combined gift of $30,000 to an individual. The current lifetime gift tax exemption amount in 2021 (it is adjusted every year for inflation) is $11.7MM per individual (or $23.4MM for a married couple). While current proposed tax legislation does not specify any change to this, the current estate tax law sunsets in 2025, when the cap drops back to $5.0MM (with an adjustment for inflation). This is a “use or lose it” situation, in that whatever is not used by the end of 2025 between the current exclusion amount and the new exclusion may no longer be available.
 
Make sure you take your Required Minimum Distributions (RMD). The CARES Act waived RMDs from IRAs for the 2020 tax year, so you may not have taken a distribution from your IRA last year. This year, the regular RMD rules are back in effect, so don’t forget to take any required RMDs in order to avoid IRS penalties. Roth IRAs do not have an RMD requirement until after the death of the owner.
 
Let us know if anything has changed. Major life changes can impact your wealth, tax, and estate plan. If you have received an inheritance, made a significant purchase, changed your marital status, or experienced other changes in your life circumstances, we encourage you to consult with KF Advisors and your tax advisors. We can help you identify adjustments to your plan or uncover opportunities to reduce taxes. 
 
As always, we are here to help you stay on track to achieve your goals and objectives. We encourage you to contact us directly with any questions you may have, or you can always reach us by phone at 212.492.7000 or email us at info@klingenstein.com. If there are any year-end transactions you would like to make, please let us know as soon as possible. Please note that U.S. financial markets and the KF Advisors office will be closed Friday, December 24th in observance of the Christmas holiday.

Important Disclosures

This material is provided for informational or educational purposes only and should not be construed as investment, accounting, tax or legal advice. Always consult a financial, tax and/or legal professional regarding your specific situation. This communication is not intended as a recommendation or as investment advice of any kind. It is not provided in a fiduciary capacity and may not be relied upon for or in connection with the making of investment decisions. Nothing herein constitutes or should be construed as an offering of advisory services or an offer to sell or a solicitation to buy any securities or a recommendation to invest in any specific investment strategy. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future returns. The views expressed herein are as of a particular point in time and are subject to change without notice. The information and opinions presented herein are general in nature and have been obtained from, or are based on, sources believed by Klingenstein Fields Advisors (“KF Advisors’) to be reliable, but KF Advisors makes no representation as to their accuracy or completeness. Although the information provided is carefully reviewed, KF Advisors cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided. KF Advisors represents two investment advisers registered with the Securities and Exchange Commission: Klingenstein, Fields & Co., L.P. and KF Group, LP. If you are a KF Advisors client, please remember that it remains your responsibility to advise KF Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.