As the end of the year approaches, I encourage everyone to take this opportunity to review their estate plans and make any necessary adjustments. The hustle and bustle of the holiday season and end-of-year financial planning can spur you to think about the future, making this an ideal moment to ensure that your plans align with your long-term goals. I also urge you to make sure that you are taking advantage of all available tax breaks before the end of the year. To help get you started, allow me to offer some year-end estate planning tips that I share with my clients.
End-of-Year Estate Plan Review
Proactive end-of-year estate planning can bring peace of mind, knowing that you have taken steps to protect your assets and support your loved ones. Consulting with an estate planning attorney is the best way to ensure that your plan is up to date and optimized to protect you, your loved one, and your assets. As the year comes to a close, however, everyone should consider the following estate planning tips:
- Review and Update Beneficiary Designations: Before ushering in the new year, check your beneficiary designations on retirement accounts, life insurance policies, and other financial accounts. Life events that occurred throughout the year, such as marriage, divorce, or the birth of a child, may warrant updates to beneficiary designations to accurately reflect your current wishes accurately and avoid unintended distributions.
- Evaluate a Financial Power of Attorney and Health Care Proxy: A Financial Power of Attorney and health care proxy should be included in a comprehensive estate plan. The end of the year is a practical time to consider whether these appointments are still appropriate and, if necessary, to make adjustments because of a shift in family dynamics or changes in your personal relationships.
- Take Advantage of the Annual Gift Tax Exclusion: The annual gift tax exclusion allows you to gift a certain amount per year, per individual, tax-free. Moreover, you can make an unlimited number of these gifts to individuals, entities, or charities as long as you stay within the current yearly exclusion amount. For the tax year 2025, the exclusion is set at $19,000. Making use of this exclusion before the end of the year can help reduce the size of your taxable estate because gifts made using the yearly exclusion do not count toward your lifetime exemption. Whether you wish to help with a grandchild’s education or support a loved one’s medical expenses, using the annual gift tax exclusion is a straightforward strategy to transfer wealth while minimizing tax implications.
- Consider Charitable Giving: If charitable giving aligns with your values, there are several ways to incorporate philanthropy into your estate plan, particularly at year’s end. Making charitable contributions before December 31 can provide tax benefits for the current year. Your estate plan offers a variety of ways to make charitable gifts, including direct donations, donor-advised funds, or the establishment of a charitable remainder/lead trust. Charitable giving within your estate plan not only supports causes that matter to you but can also reduce estate taxes, benefiting your estate and heirs.
- Organize and Secure Important Documents: An estate plan is only effective if your loved ones can easily access your documents when needed. Take this time to review and organize your estate planning documents, such as your Last Will and Testament, trust documents, and any Powers of Attorney. Ensure these documents are stored in a secure, accessible location, and inform your Personal Representative or another trusted individual of their location. Additionally, make sure any digital estate planning documents are accessible, and provide instructions on accessing digital accounts or passwords that may be needed.
- Consult with an Estate Planning Attorney: To make sure your estate plan works as intended, and that you are aware of any upcoming changes to relevant laws, consult with your estate planning attorney before the end of the year. An estate planning attorney can help you understand the tax implications of various strategies, suggest adjustments to enhance asset protection, and confirm that your plan aligns with your long-term objectives.
Can We Help You with Year End Estate Planning Tips?
For more information, please contact our estate planning office in Owings Mills, Maryland by calling 410-654-3850 to schedule an appointment.
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