New to financial planning and investing, or looking to make a change? Chad Kupreanik, CFP®, Executive Vice President of Janney Montgomery Scott, shares his insight on financial planning and some key strategies to consider for year end.
Financial planning and investing are some of the most important steps in a person’s life. An expert can make all the difference in developing a plan for you and your family, and that’s exactly what Carolina Wealth Advisors does best. With over 225 years of combined experience in the industry, Carolina Wealth Advisors of Janney Montgomery Scott consists of five financial advisors, including multiple Certified Financial PlannerTMprofessionals, along with three registered private client associates.
The Carolina Wealth Advisors team oversees over $800 million in client assets and has been named as a Forbes 2023 Best-In-State Wealth Management Team. Often working with multiple family generations, the team prides itself on the fact that it has grown its client base primarily through referrals from existing clients.
Tell us about Carolina Wealth Advisors and your areas of expertise.
We formed the team in 2001 and opened the Charlotte office of Janney Montgomery Scott in August of 2003. With roots tracing back to 1832, Janney and its long history immediately sets the firm apart from others. Our team specializes in financial planning, focusing on estate, retirement, business succession, and education planning, along with investments and long-term care strategies.
What are some things you see people doing wrong when it comes to wealth and tax strategy?
Using cash to donate to charities is a common mistake we see individuals make. Instead, we suggest that our clients consider qualified charitable distributions (QCDs), one of the most underutilized strategies available to IRA owners who are 70.5 years of age and older, when giving to charities. This is a wonderful opportunity for clients to start spending down their IRAs and reducing their future required minimum distributions (RMDs) while also making a charitable gift. While this doesn’t apply to individuals in their prime earning years, it is absolutely something their parents (or even grandparents) should understand and consider. QCDs are not included as taxable income for the client and the charity receives the gift completely tax free.
Why are the holidays such a crucial time for people to make good planning decisions?
As the holidays arrive, most people have a pretty good understanding of how their tax picture looks for the year. That knowledge allows them the opportunity to make important decisions regarding a variety of strategies. Examples include charitable giving, tax loss harvesting, capital gains avoidance, retirement account contributions, Roth IRA conversions, beneficiary designations, income deferral, income acceleration, and required minimum distributions.
What is a strategy people should be considering around the end of the year that they may not be aware of?
Roth IRA conversions, particularly in years while in lower tax brackets, are a powerful way to diversify your savings and create a pool of tax-free money for you and future generations. Additionally, the end of the year is a great time to review your capital gains exposure. If you own a mutual fund in a non-retirement account (ex. a joint account with your spouse or non-IRA in your individual name), you need to pay close attention to taxable capital gains distributions. These primarily occur in mid-November through December, and they are one of the most misunderstood and frustrating taxes you can pay. We help our clients by selling specific lots of mutual funds to better manage their capital gains tax liability.
When should people generally start thinking about these decisions?
It’s never too early to start thinking about these decisions but people tend to have more clarity as the year progresses.
Is there anything else we should know?
We should all be aware of the major changes that will come with the expiration of the 2017 Tax Cuts and Jobs Act. Changes in income tax brackets, standard deduction levels, and the estate tax exemption are some of the most important. Our team has a real concern about the scheduled reduction in the estate tax exemption and the impact it will have on our clients. The current exemption amounts are at historical highs that will likely be cut in half by 2026. This estate exemption reduction will bring many more families into the realm of estate tax liability, so it’s important to take advantage of estate planning strategies while the exemption level is still high. Consider strategies such as gifting to others (for 2023 you can give $17,000 to as many individuals as you’d like and you don’t even have to file a gift tax return), gifting to charity, buying life insurance in an irrevocable life insurance trust, accelerating funding of 529 college savings plans (you can accelerate five years of gifts), and funding certain types of trusts.
Lastly, the starting age for RMDs has undergone a lot of changes. It’s very important that IRA owners are aware of their starting age to avoid unnecessary penalties.
The concepts illustrated here have legal, accounting and tax implications. Neither Janney Montgomery Scott LLC nor its Financial Advisors give tax, legal, or accounting advice. Please consult with the appropriate professional for advice concerning your individual circumstances. For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.
In partnership with Carolina Wealth Advisors.