The Planner's Perspective: Beyond Tax Planning

By Paul Morrone CFP®, CPA/PFS, MSA

It’s now far enough in the year to make educated decisions on tax planning items such items as ROTH conversions, accelerated charitable giving, retirement plan contributions and triggering capital gains or harvesting capital losses, to name a few. While each of these considerations may warrant its own lengthy conversation or analysis, the end of the year also is a good time to look beyond taxes as many other areas of your financial plan are impacted as the clock winds down.

Consider reviewing your financial plan and benchmark your current-year progress against spending/savings goals. If you’re ahead of pace or at least on track, congratulations! If you’re behind, it’s important to ascertain why and what can be done in the next couple of weeks to right the ship. Maybe that end of the year bonus is coming in soon and can help to make up some lost ground before it’s too late. If you have materially deviated from your original plan, future adjustments may need to be made to account for missing the target.

With the end of the year coinciding with the holiday season, gifting may be a priority during December. This means reviewing all previous gifts made during the year and determining if it is prudent to transfer additional assets or maximize the annual exclusion amounts to each intended recipient. You’ll also be able to determine if you are will be required to file a gift tax return and the estimated federal (or state – CT is the only state with a gift tax) tax liability, if any.

It’s also an appropriate time to review the many moving parts of your business. You might start by reviewing cash flow and quantifying the maximum allowable retirement plan contribution, but it will likely be much more involved than that. Are your employee benefits still providing the added value that you intend them to? Have the demographics in your employee base changed materially due to new hires/fires during the year? Each of these has a material impact on insurance costs, salaries/bonuses and retirement plan suitability that should be periodically reviewed. Going a step further, you may now have access to a more recent business valuation and may have noticed a material change in the enterprise value over time. This may require an amendment to your existing buy/sell documents, estate plan or insurance policies used to maintain business continuity in the event of the premature death of an owner.

Speaking of estate planning, it is also wise to dig out your current estate plan documents and review some of the key provisions to ensure they are still consistent with your wishes. This includes a review of the beneficiaries, fiduciaries and guardians (if applicable), as relationships with people we care about can change rather quickly. Proactively addressing these concerns in your estate plan can help alleviate awkward (or worse, hostile) conversations between family members or friends if something were to happen to you prematurely. This may be as simple as gifting valuable or sentimental assets to specific people during the year or making provisions in your will or trust to clearly identify the intended beneficiary. This avoids leaving it to chance and having the “finder’s keeper’s” rule determine who gets your valuable personal property after you are gone.

Of course, we recommend going through all these items (and many more) with the help of a financial planner who knows you, your family and your business, intimately. If you are currently working with an advisor that isn’t addressing all these critical areas during your reviews, you may want to add finding a new advisor who is willing to go the extra mile to your year-end to do list.

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