Year-End Wealth Planning Checklist: Actions for High-Net-Worth Individuals

October 1, 2024

As the year draws to a close, high-net-worth individuals must take a proactive approach to their wealth management strategies. The final months of the year provide a crucial window to optimize financial plans and ensure they align with long-term goals. This comprehensive year-end financial checklist will guide you through the essential actions to maximize your wealth plan and position yourself for success in the coming year.

Review Your Investment Portfolio

• Tax-Loss Harvesting Opportunities: Year-end provides an ideal opportunity to evaluate your investment¹ portfolio for tax-loss harvesting. This approach involves selling underperforming assets to offset capital gains and lower your taxable income. By strategically realizing losses, you can reduce your tax liability and reinvest the proceeds into more promising opportunities.
• Rebalancing for the Future: As markets fluctuate, your asset allocation may drift from your target mix. Year-end planning is an excellent time to review your portfolio and rebalance if necessary. Adjusting your investments¹ ensures they align with your risk tolerance and financial goals, setting the stage for growth in the new year.

Maximize Tax Deductions and Contributions

• Retirement Contributions: Maximize your retirement contributions to take full advantage of tax-deferred growth. For those under 50, the IRS allows a maximum contribution of $23,000 to 401(k) plans for 2024, with an additional $7,500 catch-up contribution for those over 50. Contributing the maximum amount can reduce your taxable income significantly.
• Charitable Giving: If you partake in charitable giving, consider accelerating your donations before year-end to maximize your deductions. Donating appreciated securities instead of cash can offer additional tax benefits, allowing you to avoid capital gains taxes on the appreciation. Consider establishing a donor-advised fund to streamline your giving strategy while securing a tax deduction for the current year.
• Health Savings Accounts (HSAs): HSAs provide a threefold tax benefit: contributions are tax-deductible, earnings grow without being taxed, and withdrawals for eligible medical expenses are also tax-free. Ensure you’ve contributed the maximum allowable amount to your HSA before year-end to capitalize on these benefits.

Optimize Your Estate Plan

• Update Key Documents: Your estate plan² is a critical component of your overall wealth management strategy. Review critical documents such as your will, trust, and power of attorney to ensure they reflect your current wishes and circumstances. If you have experienced significant life events such as marriages, divorces, births, or deaths, you should be sure to update beneficiaries or executors.
• Gift and Estate Tax Planning: The current lifetime gift tax exemption allows you to gift up to $12.92 million per person in 2023, increasing to $13.61 million in 2024 without incurring gift taxes. This exemption, doubled by the Tax Cuts and Jobs Act of 2017, is in effect through the end of 2025. However, the exemption is set to revert to around $7 million in 2026 due to the estate tax sunset. Since estate and gift taxes are unified, gifts made during your lifetime reduce your available estate tax exemption at death. Year-end planning is an ideal time to utilize this benefit, helping to reduce your taxable estate while benefiting loved ones.

Review Your Insurance 

• Life Insurance Policies: Assess your existing life insurance³ policies to ensure they offer sufficient coverage for your needs. Consider whether changes in your financial situation or life circumstances warrant adjustments to your policy’s face value or beneficiary designations.
• Consider Personalized Insurance: If you have specific insurance³ needs, it may be worth considering personalized insurance policies. Unlike standard policies from big companies, personalized insurance policies are created based on your needs, ensuring every aspect of your coverage is designed with your needs in mind. This approach eliminates any gaps that can occur with one-size-fits-all policies, providing you with comprehensive coverage that aligns perfectly with your circumstances.

Plan for Philanthropy and Charitable Giving

• Strategize Your Philanthropic Efforts: As the year ends, take a closer look at your charitable giving strategies. If your wealth plan includes substantial philanthropic goals, consider how to structure your contributions to maximize their impact. Donor-advised funds and charitable trusts are effective tools for managing significant donations while enjoying tax benefits.
• Evaluate Charitable Contributions: Ensure that your charitable contributions align with your overall financial planning checklist. Review the organizations you support and consider whether they continue to reflect your values and philanthropic goals. Year-end planning provides an opportunity to reassess your giving strategy and make any necessary adjustments.

Review Cash Flow and Budgeting

• Year-End Budget Review: Evaluate your cash flow and budgeting strategies by analyzing your income, expenses, and savings to confirm you’re on track to achieve your financial goals. This assessment can also highlight areas where you may need to adjust your financial habits for the upcoming year.
• Plan for Upcoming Expenses: Consider any significant expenses or financial commitments you anticipate in the new year. Whether funding a child’s education, purchasing a second home, or planning for retirement, incorporating these goals into your year-end financial checklist will help ensure you’re prepared.

Consult with Financial Advisors

• Collaborate with Professionals: High-net-worth individuals often benefit from a team of financial professionals, including advisors, tax specialists, and estate planners. Schedule a year-end meeting with your advisors to review your financial checklist and ensure all aspects of your wealth plan are optimized. A comprehensive review with professionals can provide valuable insights and help you navigate complex financial decisions.
• Leverage First Western Trust: As you finalize your year-end planning, consider reaching out to First Western Trust to see how we can support your wealth management needs. With extensive experience and understanding of the unique challenges faced by high-net-worth individuals, our team is equipped to offer personalized guidance and comprehensive wealth solutions that align with your goals.

Conclusion 

Taking the time to implement this year-end financial checklist will not only help you optimize your wealth plan but also position you for continued success in the new year. By addressing these areas, you can ensure that your financial plans are on track and aligned with your long-term objectives. 

If you’re interested in a professional second opinion or some guidance as you close out the year, refine your wealth strategy, and prepare for the year ahead, we invite you to schedule a personalized review with First Western Trust. 

¹ Investment Services are Not a deposit, Not guaranteed by the Bank, May Lose Value

² Estate Planning Services are Not a deposit, Not guaranteed by the Bank, May Lose Value

³ Insurance Services are Not a deposit, Not guaranteed by the Bank, May Lose Value

First Western Trust Bank cannot provide tax advice. Please consult your tax advisor for guidance on how the information contained within may apply to your specific situation.

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