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Four months into 2021, how can you continue steering your financial plan forward amid uncertainty? We think these 10 ideas have potential for successful outcomes.

Man using laptop computer in kitchen while standing drinking a cup of coffee.Have you set specific financial, investment, estate, and philanthropic goals for 2021 and beyond? If not, these ideas can get you started. If so, fantastic — these 10 opportunities can enhance your plans.

1. Confirm that you’re comfortable with your portfolio positioning.

First, attend to underlying portfolio exposures. Recent volatility in sectors with high valuations coming into the year (e.g. technology stocks) serves as a reminder. Growth has handily outperformed value since the 2008-2009 period, but such phases tend to be secular. An imminent shift is not certain, but as the economy continues to pull out of COVID-19-induced slowdowns, value-oriented names may continue to fare well.

2. Incorporate possible tax scenarios in your planning.

With details of possible tax legislation changing by the day, this will be a year to stay tuned to tangible developments. We don’t recommend making rash decisions based on conjecture. But as talks continue, understanding implications and managing income and deductions over the coming years could make a sizeable difference in your tax situation. Members of the administration and Congress are reportedly evaluating essentially any and all revenue raisers as a means to offset increased deficits. Income taxes, estate taxes, capital gains, carried interest, and corporate taxes are all on the table. 

3. Evaluate your cash management strategy.

With yields close to zero, and likely to remain at that level into 2022, it’s important to maintain a prudent cash management strategy. Evaluate balances relative to short- and intermediate-term needs to determine appropriate levels. Ensure bank cash balances respect FDIC/NCUA limits and seek alternatives where warranted to provide protections. 

4. Consider RMD/QCD planning.

The recent American Rescue Plan was silent on required minimum distributions (RMDs), so they will proceed this year under normal rules after being waived in 2020. Evaluate the role RMDs will play in cash flow and tax planning. Consider the use of year-end RMD withholding as a replacement for quarterly estimates if RMD will be in excess of required tax payments. Remember that qualified charitable distributions (QCDs) remain a viable option for the charitably inclined to partially or fully offset RMDs. For those considering QCDs, as noted earlier this year, it may still be wise to wait for clarity on tax policy and the resulting impact on itemized deductions. 

5. Review insurance policies.

With record-low yields, dividend crediting rates on whole life policies may be negatively impacted. Without proper management, this trend could place certain policies at risk of lapse over time. Reviewing your policies now and developing a plan to protect your coverage allows time to make appropriate changes. It’s important to assess whether the current structure remains appropriate for your situation as well.

6. Develop your family education plan.

Now is a great time to refocus on your family’s financial future. Developing a proper plan to bring the next generations into the fold isn’t only a good complement to sound financial planning, but critical to its execution. Developing the next generation to operate as sound stewards of your legacy is a high-impact activity that magnifies the benefits of prudent wealth planning.

7. Use low rates to your advantage for wealth transfer.

This environment is still extremely conducive for intrafamily wealth transfer. Utilizing notes between families or entities, selling assets to grantor trusts, or using grantor-retained annuity trusts (GRATs) all remain attractive strategies. As noted above, revenue-raising areas of tax legislation are under consideration this year. This may include future restrictions on certain wealth transfer strategies, adding to the prospect that this is a good year to evaluate these tools. Opportunities exist to revisit strategies already implemented as well. Two potential such opportunities include freezing upside in GRATs funded in 2020 and refinancing existing debt in place.

8. Review your estate plan.

2020 highlighted the importance of planning for the unexpected, and that lesson extends to your estate plan. Review the key tenets of your plan and confirm that they still align with your wishes. This includes trustees, personal representatives, financial and healthcare powers of attorney, guardians, distribution provisions, among others.

9. Don’t forget the estate planning “freebies.”

While this remains a favorable environment for advanced wealth transfer strategies, keep in mind the simpler options. The annual exclusion gift limit remains at $15,000 per person. You have the ability to pay for medical expenses, with no limit, as long as you pay the medical provider directly. And you can still pay for education expenses, also with no limit, and again, as long as you issue payment to the institution and not the individual.

10.  Plan for philanthropic giving.

Donor-advised funds and family foundation balances have swelled in recent years, due to both accelerated gifting for tax purposes and market performance. This is a great time to take a step back and develop or confirm your strategic plan for the funds available for grants moving forward.
As with many financial topics, these planning concepts shouldn’t be viewed in a silo. Your advisory team can work with you to tie those pertinent to you to your broader plan. Feel free to contact your relationship manager to discuss further.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.


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