2021 Year-End Planning Checklist

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December 6, 2021

2021 has been a year of mixed emotions, having confronted many challenges and uncertainties around proposed legislative changes, with markets simultaneously climbing to all-time highs. As we head into the new year, now is the time to take stock and assess whether your wealth strategy utilizes the appropriate strategies to address the current tax law, soaring market returns, and any changes to your goals or family circumstances.

While the deadline for implementing most strategies is December 31, 2021, due to the last-minute rush around the holidays, we anticipate a high volume of requests from clients, and both attorneys and accountants to be inundated. If you require any year-end planning needs, please reach out to a member of your NewEdge Wealth team to discuss your personal situation as soon as possible.

Investment and Income Tax Considerations

  • Review your portfolio and rebalance if needed, aligning your investment objective with any changes to your wealth strategy goals.
  • Determine your capital gains tax rate and whether adjusting the timing of recognizing capital gains makes sense. For example, if you have a highly concentrated position and are currently in a lower tax bracket, it may make sense to make additional sales in 2021.
    • Current proposals do not call for an increase in capital gains rates in 2022. However, increased capital gains can push you into a higher income tax bracket.
  • Manage income tax brackets and consider accelerating income into years when you expect taxes to be lower. Review plans to sell assets, other than publicly traded securities, on the installment basis. Installment sales could result in deferring gains into higher income tax brackets under proposed tax legislation.
    • Current proposals under the Build Back Better Act (BBBA) do not call for an increase to income tax rates in 2022 except for those with adjusted gross income above $10,000,000.
  • Tax-loss selling. With strong market performance in 2021, there may be limited opportunities this year to take advantage of losses for tax planning. Additionally, consider delaying taking capital losses if you expect to be in a lower tax bracket in 2022. For example, losses will generate a better tax result when offsetting gains taxed at a higher rate.
  • If your capital losses exceed your capital gains, you may use up to $3,000 in additional capital losses to reduce other types of taxable income and carry forward the remainder indefinitely.
  • Tax swaps within fixed income. This strategy allows you to take a loss in your portfolio while immediately repurchasing a similar position with different factors such as credit quality, maturity, and duration. This strategy can create a capital loss for tax purposes, while maintaining or enhancing the overall credit quality of your portfolio and increasing current income.
  • Avoid wash sales. A wash sale occurs when you sell an asset for a loss and then repurchase a substantially similar asset within 30 days. In the case of a wash sale, the IRS prevents the taxpayer from taking the tax deduction for the security sold.

Year-End Gifting Opportunities

  • Don’t forget estate planning “freebies.” The annual exclusion gift limit remains at $15,000 per recipient. Reach out to your NewEdge Wealth team prior to December 31, 2021, to avoid the year-end rush.
  • Medical expenses and education expenses can be paid without gift tax limitation, as long as you pay the medical provider/institution directly. There is no cap on this amount.
  • Consider state deductions for contributions to 529 plans. However, be aware that this counts towards your $15,000 annual exclusion gift per recipient. Depending on your situation, it may make sense to gift other assets to the recipient and pay tuition to the institution directly.
  • Gift assets that have a high likelihood to grow significantly to remove any future appreciation from your taxable estate. You may also evaluate the option of gifting long-term appreciated assets but recognize the recipient will lose the current benefit of receiving a step-up in cost basis upon your death.

Align Your Estate Plan with Your Goals

  • Reconfirm basic estate planning documents are executed and up to date, including a review of asset titling and beneficiary designations.
  • Meet with your NewEdge Wealth team to revisit cash flow and projected growth of your taxable estate. This will help determine if the wealth transfer strategy in place will continue to meet your goals for transferring both your personal and business assets.
  • Consider utilization of the current $11.70 million federal estate, gift and generation skipping transfer (GST) tax exemption per person before it is reduced by the earlier of proposed legislation or the year 2026.
  • Take advantage of the current low interest rate environment to use techniques such as intra-family loans and installment sales to intentionally defective grantor trusts (IDGTs), grantor retained annuity trusts (GRATs), irrevocable life insurance trusts (ILITs), spousal lifetime access trusts (SLATs), and charitable lead annuity trusts (CLATs). It is important to note changes under proposed legislation may impact the use of these grantor trusts.
  • Review insurance coverage to make sure it is owned properly and meets your family’s survivorship and estate tax planning needs. Your NewEdge Wealth team can help perform a life insurance analysis and coordinate a review.
  • Discuss developing a family education plan to communicate your implemented strategies to the next generation and prepare them for the wealth they may receive. Families tend to get together over the holidays, which is a good time to start the conversation.

Charitable Giving Plan Considerations

  • Donate long-term appreciated assets instead of cash when possible. If you donate long-term appreciated assets such as stocks, bonds, or real estate to charity, you generally do not have to pay capital gains. You can also take an income tax deduction up to the full fair-market value, subject to AGI limitations. The recipient charity receives the full value of the asset and will not be subject to taxes upon any subsequent sales.
  • Consider utilizing a Donor Advised Fund (DAF) and evaluate “bunching” a few years of charitable contributions into the current year to increase your itemized deductions above the standard deduction threshold in 2021. You will receive a charitable deduction in the year of contribution but may defer distribution to a public charity to a later year.
  • If over age 70 ½, evaluate the tax benefit of using a Qualified Charitable Distribution (QCD) to satisfy up to $100,000 of your required minimum distribution (RMD). The qualified charitable distribution (QCD) rule allows traditional IRA owners to satisfy a portion of their RMD, exclude up to $100,000 from income, and contribute funds directly to charities without itemizing.
    • Note: You cannot make a QCD to donor-advised funds, private foundations, supporting organizations, and other grant-making organizations.
  • Give away the gain. If you expect to realize significant gains this year from investment transactions or a sale of a business or real estate, consider implementing a charitable strategy to reduce your tax bill on these gains.
  • The following charitable opportunities from the CARES Act are still available in 2021. These apply only to cash gifts made to qualifying charities (excludes a DAF, private non-operating foundation, supporting organizations, etc.).
    • You may deduct up to $300 ($600 for joint filers) in addition to your standard deduction, or
    • You may deduct up to 100% of your AGI if you itemize your deductions.

Interest Rates

  • Consider strategic borrowing, as opposed to selling and incurring a taxable gain, to support tax planning given that interest rates are near historic lows. If you’d like to discuss if a financing strategy is right for you, please reach out.
  • Take advantage of the current low interest rate environment by reviewing outstanding debt or existing contracts tied to interest rates and consider whether refinancing or swapping out of an adjustable-rate loan for a fixed rate would be beneficial.

Retirement Plans

  • Maximize contributions to employer retirement accounts and Health Savings Accounts (HSAs). If contributing to your IRA, the deadline is April 15, 2022.
    • Note: Proposed legislation may limit the size of these accounts in future years.
  • Required Minimum Distributions (RMDs) must be taken by December 31, 2021. RMDs were waived in 2020 but are NOT waived for 2021.
  • Consider Roth conversions or backdoor Roth IRA contributions. See our recent article on this subject.
  • Review beneficiary designations for retirement plans given most non-spousal beneficiaries are now required to withdraw inherited IRA assets within 10 years of the date of death under the SECURE Act.




The views and opinions included in these materials belong to their author and do not necessarily reflect the views and opinions of NewEdge Capital Group, LLC.

This information is general in nature and has been prepared solely for informational and educational purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy.

NewEdge and its affiliates do not render advice on legal, tax and/or tax accounting matters.  You should consult your personal tax and/or legal advisor to learn about any potential tax or other implications that may result from acting on a particular recommendation.

The trademarks and service marks contained herein are the property of their respective owners. Unless otherwise specifically indicated, all information with respect to any third party not affiliated with NewEdge has been provided by, and is the sole responsibility of, such third party and has not been independently verified by NewEdge, its affiliates or any other independent third party. No representation is given with respect to its accuracy or completeness, and such information and opinions may change without notice.

Investing involves risk, including possible loss of principal.  Past performance is no guarantee of future results.

Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No assurance can be given that investment objectives or target returns will be achieved. Future returns may be higher or lower than the estimates presented herein.

An investment cannot be made directly in an index. Indices are unmanaged and have no fees or expenses. You can obtain information about many indices online at a variety of sources including:  https://www.sec.gov/fast-answers/answersindiceshtm.html or http://www.nasdaq.com/reference/index-descriptions.aspx.

All data is subject to change without notice.

© 2022 NewEdge Capital Group, LLC

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