Your end of year tax, financial checklist


As we approach the end of 2016, there are many estate planning techniques that you should consider before Dec. 31.


Have you made your annual exclusion gifts? Under federal tax laws, individuals can give up to $14,000 to each person free of gift tax. Married couples can jointly give up to $28,000 without incurring gift tax or using any of their lifetime exemption.

Individuals have $5.45 million lifetime credit, so you may give $5.45 million without incurring any gift tax over your lifetime. This is useful for transferring wealth to the next generation.

For a gift to meet the end of year deadline, you need to follow some requirements.

If you send a check to your loved ones, they need to cash it before Dec. 31. If you make taxable gifts beyond the $14,000 annual exclusion, you need to consider who will pay the gift tax. Typically, you are responsible, but there are ways to shift the tax burden to the recipient.

Given proper planning, you can maximize annual exclusion gifts and your unified credit. There are various discounts associated with gifting partial interests in real property or minority interests in a family-owned company.

However, the Treasury Department has proposed changes to Internal Revenue Code Section 2704. If they are adopted, there will be additional restrictions on valuation discounts for transfers between family members of interests in family-controlled corporations, partnerships, limited liability companies and other business associations.

Typically, estate planners use discounts if the recipient of your gift holds less than 50 percent of your company.  The proposed regulations change what that means to us.

With the new regulations, you must aggregate the interest held by the recipient, their estate and their family to determine whether that person has control over the company.

Charitable donations

There are multiple benefits to giving to charities. In addition to supporting a cause you feel strongly about, donations can reduce your estate tax exposure, and you can receive an income tax deduction.

Additionally, if you give an appreciated asset, you can avoid capital gains tax, and the charity can sell the asset and benefit from the increased value without having to pay tax.

You can also create your own charitable organization but to ensure a gift to your own organization qualifies for an income tax deduction, that entity must be qualified to receive tax deductible donations under the Internal Revenue Code.

Review your estate plan

It is important to review your current estate plan annually. Many events happen in our lives that can render a plan outdated.

Has your family grown? Did you sell or buy assets? Are the nominations you made for executors, successor trustees or agents still appropriate? Have you listed a guardian for your minor children?

Laws also change. If your estate plan is more than five years old, you should have your estate planning attorney review it to see if there have been any changes to the laws that would adversely impact your plan.

Review your finances

This is also the time to start to gather your financial information for your accountant. Look at your property tax, bank and brokerage statements to verify that your assets refer to your trust or you as trustee.

If you are receiving anything in your individual name, it is crucial that you re-title it in your trust’s name.  Courts are increasingly strict about obtaining authorization to transfer assets.

If you hold assets at your death in your individual name, your heirs may be forced to probate your estate to transfer those assets into your trust.

Wendy M. Morodomi is an associate attorney at Calone & Harrel Law Group, LLP. and is certified in estate planning. She may be reached at [email protected]


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