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Year End Planning Letter

The end of the year presents a unique opportunity to look at your overall personal financial situation. With factors like tax reform, life changes or just working towards your goals, now is an especially important time to review things. Taking what we now know about the new tax law and weaving together all of the other areas of your personal finances is one of the key ways we provide value to you as your trusted adviser. Below are some things we’d like to help you think through before the year ends.

Introducing Tax Caddy

October 15th marked the official end of the 2017 tax filing season (for extended returns) and now we have turned our attention to 2018 tax returns. We recognize how painful the tax filing process can be and how much work you have to do to gather information for us to prepare your returns. This is why we are always looking for ways to make this process easier for you.

Tax Loss Harvesting

Last year was unusual. The US stock market posted positive returns every single month and other stock markets around the world also posted strong returns. This year has been more “normal” as we’ve seen some months with strong returns and some with losses. Some asset classes, like international stocks, are now down significantly on the year. Unfortunately, these losses feel worse than the gains we previously experienced, a concept called loss aversion first identified by the brilliant Amos Tversky and Daniel Kahneman.

New Additions to the Firm

We are pleased to announce two new staff members at the firm who started in October. As our firm grows and we continue to expand the ways we serve our clients, Joey and Julia will be an important part of the L.K. Benson & Company team!

Qualified Opportunity Funds

Last year’s Tax Cuts and Jobs Act (TCJA) made sweeping changes to many areas of tax law for both individuals and businesses. We’ve spent a lot of time explaining these changes and how they will impact you. However, there was an important piece of the legislation we haven’t discussed yet that created a new type of investment called Qualified Opportunity Funds (QOF) that offer intriguing tax benefits. The IRS recently released further guidance on QOF’s and that has spurred additional awareness and publicity. This is still a new area of tax law and there are open questions on certain aspects of the legislation, but here is what we know now.

Estate Planning - NOT Estate TAX Planning

The recent doubling of the federal estate tax exemption under the Tax Cut and Jobs Act (TCJA) was just the latest in a series of increases over the past 20 years. The exemption is now over $11 million per person, rising from just $600k back in 1997. With the federal exemption set at such a high level, many people feel they don’t need to worry about “estate planning”. After all, if their “estate” is below that $11.18 million level ($22.36 million for married couples), they don’t have to worry about paying any estate tax, so why worry about planning?