2025 Year-End Planning Considerations

As 2026 approaches, we would like to highlight several year-end planning opportunities for you to consider, many of which could help you with your longer-term goals. We encourage you to speak with us as well as your tax professionals to determine how we can be helpful.

GIFTING AND ESTATE TAX CONSIDERATIONS

Year-End Action Items

• Consider making annual exclusion gifts of up to $19K for individuals or $38K for married couples who elect to split gifts. To qualify for a 2025 deduction, gifts must be made by 12/31/2025. Cash gifts must clear in the recipient’s account on or before this date.
• Gifts to 529 college savings plans for children or grandchildren can be front-loaded with up to five years’ worth of annual exclusion gifts. Each situation is unique; we can help evaluate appropriate savings rates to stay aligned with tuition goals without overfunding plans.
• For those so inclined, consider making charitable contributions before year-end to help offset a higher-income year.
• Remember to take your required minimum distribution (RMD) from your IRA or 401(k).

Charitable Donations

• Beginning in 2026, high-income taxpayers will face both a floor (0.5%) and a ceiling (35%) on charitable deductions. Therefore, there is a compelling case for front-loading charitable giving before the end of 2025.
• “Bunching” charitable donations into a single tax year provides an opportunity to use your itemized deductions to offset higher-than-usual income, such as capital gains from a home or equity sale. For all but the smallest charitable donations, we recommend using appreciated stock rather than cash, as you avoid capital gains taxes on gifted shares.

Donor-Advised Fund (DAFs)

• Gifting to a donor-advised fund – a popular vehicle for making charitable donations –provides several benefits, including the ability to reduce taxes in a year in which taxable income is unusually high and “prefunding” charitable giving that you anticipate continuing in subsequent years.
• You receive a tax deduction for the year in which contributions are made but you can make gifts from the DAF to your preferred charities later.
• We can help you establish your DAF, partnering with organizations such as American Endowment Foundation, Jewish Communal Fund, or other third-party sponsors.

Qualified Charitable Distribution (QCDs)

• If you have not satisfied your RMD, making a qualified charitable distribution (QCD) from your IRA is a tax-efficient means of making charitable gifts.
• You must be age 70½ or older, and the contribution must be made directly from the IRA to the charitable organization(s). Beginning in 2026, the maximum annual QCD limit will increase to $111K (from $108K in 2025).
• If you are eligible to make a QCD, your tax professional can help you compare the relative pros and cons of the QCD versus donating appreciated stock from a taxable account. For some individuals, donating appreciated stock and receiving the tax deduction will be the most tax-efficient approach. For others, the QCD will be optimal. The best approach may even vary from one year to the next, depending on your particular situation.

RETIREMENT

Retirement Plan Contributions (2025 Limits & Deadlines)

Roth IRA Conversions

• A Roth IRA conversion may be beneficial for IRA owners who have taxable (non-qualified) assets on hand for the tax payment, do not need their retirement funds in the short- to medium-term, want to add to their tax-exempt assets, and are focused on leaving an efficient legacy.
• However, attention should be paid to the One Big Beautiful Bill Act (OBBBA). Planned Roth IRA conversions may need to be reassessed for high-income earners in high-tax states whose taxable income is close to the state and local tax (SALT) deduction phaseouts.

Required Minimum Distribution (RMDs)

• If you have an RMD, it must be satisfied by 12/31/2025.
• Beginning in 2023, the SECURE 2.0 Act raised the age at which original retirement plan owners (with certain exemptions) must begin taking RMDs to either 73 or 75, depending on birth year. Individuals born between 1/1/1951 and 12/31/1959 are required to take their first RMD in the year they turn 73.
• Those taking first-time distributions in 2025 may delay until 4/1/2026 but will be mandated to take two RMDs that year—the first by 4/1/2026, which satisfies your required withdrawal for 2025, and the second by 12/31/2026, which satisfies your required withdrawal for 2026.
• For those who inherited IRAs after 12/31/2019, understanding if you are considered an eligible designated beneficiary¹ or a non-eligible designated beneficiary² will be helpful in determining if you are exempt from the 10-year rule, subject to the 10-year rule without RMDs, or subject to both the 10-year rule and RMDs.

TAXES

Tax-Loss Harvesting

• Tax-loss harvesting, or selling an investment at a loss, can help minimize capital gains and reduce federal taxable income for the year (up to a $3K income offset if you have no net capital gain).
• Realized losses that cannot be used in 2025 may be carried forward indefinitely into future tax years at the federal level. (State rules vary).

WEALTH PLANNING

Our Wealth Advisory Service

• By creating a comprehensive, customized Wealth Analysis that reflects your financial and investment objectives, net worth, detailed cash flows, asset allocation, and insurance coverage, we can facilitate thoughtful discussions with you on a range of topics. These conversations often address the purchase or sale of real estate, moving to another state, accelerating or delaying retirement, making sizable annual or lifetime gifts to the next generation, and paying for long-term care costs. For individuals who are newly retired or nearing retirement, the following perspective may also be helpful: I Just Retired – Now What?
• The end of the year is a good time to review your asset allocation and risk tolerance to ensure they are aligned with your goals and time horizon.
• We can also support you in trust and estate planning matters such as reviewing your existing plans, making recommendations (such as the pros and cons of revocable trusts), and working with your legal professionals to implement revisions that help to achieve personal, income, and estate tax planning goals. In addition, we can assist with family discussions and education related to family governance and dynamics and helping the next generation understand the goals and intent of family wealth.
• If you have life insurance policies, consider a review to assess whether the policy still meets your planning needs. Check that the policy ownership and beneficiary designations still make sense and ensure the policy is still viable.
• If you own a long-term care insurance policy, you may have been contacted regarding a premium increase. These decisions are complex and require analysis. While every case is different, it has been our observation that many older policies feature benefits that may no longer be available in today’s marketplace. In many cases, it is prudent to retain the policy without significantly lowering benefits, subject to the affordability of the premiums. Please do not hesitate to reach out to us if you need help evaluating your options.
• If you have recently purchased or sold real estate, valuables, and/or collectibles (e.g., artwork, automobiles, wine, jewelry), your property and casualty coverage should be reviewed. Periodically, it is also beneficial to review your excess personal liability/umbrella coverage to ensure it is sufficient³.

FIXED INCOME & CASH MANAGEMENT

Reviewing Fixed Income Mutual Fund Shares

• If you have fixed-income investments in mutual funds, now may be an opportune time to re-evaluate these holdings.
• Swapping bond mutual fund shares for individual bonds may provide an opportunity to harvest tax losses to offset capital gains. Because bond funds distribute income regularly and the prices of the underlying bond holdings have limited room to appreciate, fund values tend to stay relatively stable or may drift lower, particularly during periods of rising interest rates.
• Owning individual bonds allows us to structure your portfolio to ensure cash flows are available when you need them without being forced to sell shares of funds or stocks at inopportune times.
• One of the major benefits to owning your own bonds is that you will know what you hold.

Excess Cash

• If you are holding excess cash – more cash than you are likely to require during the next several months – it may make sense to invest it in either short-term cash equivalents, like a money market fund or US Treasury bills, or longer-term investments, such as tax-exempt municipal bonds or other fixed-income securities. These types of assets are typically associated with an investment objective of preservation of capital and can help you maximize your earnings while having a ready source of funds. Certain investments may also help you reduce your taxable income.

BENFICIARY DESIGNATIONS

Revisiting Your Designations

• We recommend that you review and coordinate your beneficiary designations to ensure they are aligned with your wishes and overall estate plan.
• It is important to remember that beneficiary designations supersede your will.
• Assets that commonly pass by beneficiary designation are retirement accounts, life insurance policies, and annuities. It is important to review TOD (transfer on death) and POD (payable on death) designations to ensure they align with your estate planning documents.
• If you have a revocable trust, ensure that you have retitled relevant assets to the trust as recommended by counsel.

A LOOK AHEAD

Federal Estate & Gift Tax Exemptions

• Federal estate and lifetime gift tax exemptions will increase from $13.99M in 2025 to $15M in 2026, or $30M for married couples. This represents the amount an individual can gift during their lifetime (or at death) without being assessed a gift or estate tax (with rates up to 40%).
• While the urgency to imminently utilize the exemption may have abated, there are still many long-term benefits to implementing gifts now rather than waiting. Learn more: Maximize Your Next Generation Gifting.
• With exemptions so high, an individual may unintentionally fund a trust with more than anticipated. We recommend reviewing your estate plan to ensure it continues to reflect your goals. Many estate plans fund trusts with “formula amounts” to achieve maximum estate tax savings. Please let us know if we can help.

Gift Tax Exclusion Limits

• The annual gift tax exclusion will remain at $19K per individual ($38K per couple) in 2026.
• Gifts can be made “in-kind” by transferring securities valued up to the annual exclusion amount; however, the recipient will inherit the donor’s cost basis. Please consult with your tax professional to understand the consequences of the gift.
• Even if you have maximized your annual gift tax exclusion on behalf of a recipient, tuition and medical payments made directly to an accredited educational institution or healthcare provider on behalf of that individual are not counted against your lifetime gift and estate tax exemption.

Standard Deduction

• The IRS has indicated that the standard deduction will increase for tax year 2026: Married/Filing Jointly – $32,200 (from $31,500 in 2025), Single/Filing Separately – $16,100 ($15,750 in 2025), Head of Household – $24,150 ($23,625 in 2025).

Social Security

• According to the Social Security Administration, Social Security recipients will receive a 2.8% increase in benefits beginning in January 2026, due to a cost-of-living adjustment.

¹Eligible designated beneficiaries include the spouse or minor child of the deceased account holder, a disabled or chronically ill individual, and an individual who is not more than 10 years younger than the IRA owner or plan participant.

²Non-eligible designated beneficiaries include non-spouses and certain trusts.

³The industry typically recommends personal liability insurance that matches your net worth up to $20M or $25M.