Dear Clients, Colleagues and Friends:
Autumn has fallen but the market continues to make new heights. While a few venerable investment banks are forecasting an ‘end to the party’ in the US economy as soon as 2020, there is no sign of a predicted slowdown using equities as a measure. Of course, the ‘top’ of the stock market will only reveal itself in hindsight, but as interest rates go up, and they have increased substantially over the past twenty-three months, bonds become more appealing both empirically (higher income) and relatively (compared to stocks). We are carefully poring over portfolios to ensure that if or when the party does end, the impact will be dampened substantially by allocation changes we have made and continue to make.
As the fourth quarter begins today, we turn our sights to planning. The end of the year has some time sensitive actions for many clients, although these actions differ from family to family. We are here to evaluate and assist if any of these moves apply to you and whether you need to act before year-end. This is a partial list, but feel free to call and discuss any specific situation with me.
Required Minimum Distributions (!) – For those of you over 70 ½ the annual IRA distributions are due by December 31, 2018. There is fifty percent penalty on the amount you are mandated to distribute if you fail to. That is not a typo. We will contact you if you are subject to an RMD from any account. If you have an account ‘away’ from Lionshead, we are happy to help you calculate the amount.
Annual exclusion gifts – every adult is permitted to give any person, be it family, friend or foe, adult or child, a maximum of $15,000 per calendar year gift, tax-free but not tax-deductible. For married couples, this is doubled to $30,000. This gift exemption is calendar year “use it or lose it” at year-end. Contributions to 529 education plans also count for this purpose and can help secure a small state income tax deduction in some states.
Expanded estate tax exemptions present opportunities to plan your estate and save on transfer taxes. The new tax law allows individuals to give $11,180,000 exempt from federal estate tax, and twice that for married couples. Through trust planning, discounts may be taken to increase the value of gifts. While not necessarily required for the end of 2018, these exemption levels are at their highest ever, but may not last forever.
Charitable Gifts – With markets at all-time highs, now is an excellent time to use appreciated stocks and securities to fulfill your philanthropy goals, at any level. Most charities are equipped to receive shares of stock through their brokers. Using stock gets you maximum benefit because you avoid capital gains tax on the (now) unrealized gain. You get the deduction for the full value of the gift, subject to certain limits. The non-profit organization won’t pay taxes on the gain, so they are equally happy! If you don’t yet have a favorite charity and want to secure a deduction now, consider a ‘donor-advised fund’ to set the money aside this year for a future gift.
Please contact our office to discuss any of the above or any other financial question that you may have.
Scott Lasky, CFP