YEAR-END ESTATE PLANNING TIPS
The end of 2019 is almost here. Before you get busy planning for the holiday season, New Year’s, and hopefully a late playoff push by the Eagles, I wanted to remind you of several tips for year-end tax and estate planning. These include using your gift tax exemption, taking required minimum withdrawals from IRA accounts and making sure your estate plan is up to date. If you have any questions about these topics, please feel free to contact my office at firstname.lastname@example.org.
In 2019, you are allowed to make gifts of up to $15,000 to an individual without that gift counting against your lifetime gift tax exclusion of $11.4 million. The $15,000 gift tax limit is per recipient, which means that you can give gifts totaling $15,000 to as many different people as you would like.
For example, if you have three children to whom you would like to make gifts, you can give each child up to $15,000 in cash or assets this year, and none of those gifts will count against your lifetime exemption. And even better, you have the ability to make split gifts with your spouse, which means both you and your spouse can each make gifts of $15,000 to one person.
If you exceed the $15,000 per person limit, you will need to file a gift tax return with the IRS to report the gift, although it is unlikely you will owe any gift tax because of the $11.4 million gift tax exclusion limit. Making gifts under the $15,000 per person limit is a great way to reduce the size of your taxable estate.
Required Minimum Withdrawals from IRA Accounts
For those who have reached the age of 70 ½ and own traditional IRA accounts, you must begin taking annual withdrawals, otherwise known as required minimum withdrawals (RMDs), no later than April 1 of the year following the calendar year you turn 70 ½. Subsequent RMDs must be taken by the end of each calendar year.
Similarly, those who own inherited IRAs must also take annual RMDs based on their life expectancy by December 31st. Make sure that you take your required RMD in full by end of 2019, because the amount of any RMD shortfall – that is if you fail to take the entire required RMD or you fail to take your RMD at all – is subject to a 50% IRS penalty.
RMD calculators are widely available from financial service companies, and your financial advisor may even calculate your RMD for you to ensure you take your required RMD this year.
Revisiting Your Existing Estate Plan
Has it been a while since you last reviewed your will, powers of attorney and other estate planning documents? Because circumstances and objectives change, it is a good idea to periodically revisit and consider updating your estate planning documents and beneficiary designations.
For example, your net worth may have changed, you may have gotten married or remarried, or you want to change who inherits your property or financial assets. Big life changes merit a fresh look at your estate planning documents to make sure they reflect your current needs and objectives, and to help avoid costly mistakes. As part of your New Year’s resolution, contact an estate planning attorney to review your estate planning needs.