December Estate Planning To-Dos

December is an ideal time to review your estate plan, just as you might reflect on the past year and set goals for the next. Take these steps to ensure your estate documents accurately reflect your current wishes and are properly organized.

1. Review and Update Documents
   • Locate and review the following documents:
     • Your Will
     • Your Trusts
     • Your Powers of Attorney
     • Your Healthcare Directives
   •  Review any major life changes that have occurred in your and your family’s life this year. That could include marriages, divorces, births, deaths, or geographic or career moves.
   • Develop a list of the major life events and what changes to your estate documents might be needed.
   • Include any questions you may have.
   • Consult your attorney to ensure the correct changes are made and all your questions are answered.
2. Review Beneficiary Designations
   • Gather and review the following documents. What beneficiaries do you have listed on your:
     • Retirement accounts 
     • Life insurance  
     • Bank accounts with payable-on-death designations.
   • The proceeds from all these assets pass outside of your will. Make sure the designated beneficiaries align with your current wishes and won’t create unintended consequences.
3. Take advantage of the annual gift tax exclusion
   • For 2025, you can give up to $19,000 per person ($38,000 for married couples) without filing a gift tax return.
   • You can give this amount to as many people as you want each year without filing a gift tax return.
   • Ensure that you make these gifts before December 31st to maximize your tax-free giving.
4. For Significant Estates, Use the Lifetime Estate and Gift Tax Exemption (changed by OBBBA)
   • In 2025, benefactors may gift $13.99 million per person.
   • In 2026, the amount will increase to $15 million per person. This amount was made permanent by the One Big Beautiful Bill Act.
   • This applies to cumulative gifts above the annual exclusion over your lifetime and your estate at death.
5. Charitable Giving Strategies
   • The end of the year is a great time to consider charitable giving strategies. If you’re charitably inclined, it’s time to finalize donations for tax deductions. Here are three strategies that are particularly tax efficient:
     • Qualified Charitable Distributions (QCDs) from IRAs.
       • What it is: A QCD from an IRA is an IRA withdrawal made directly to a qualified charity that counts as a distribution but is excluded from the donor’s taxable income. This strategy is available to individuals who are age 70½ or older and can be a tax-efficient way to fulfill your Required Minimum Distribution (RMD) if you already donate to charity. 
       • What it does: A QCD allows individuals aged 70½ or older to transfer money directly from their IRA to a qualified charity. Each eligible IRA owner can exclude up to $105,000 in QCDs from taxable income, and married couples can donate up to $210,000 combined if both qualify.
     • Donor-Advised Funds (DAFs): 
       • What it is: A DAF is essentially a charitable investment account into which you contribute assets, receive an immediate tax deduction, and then recommend grants to charities over time.
       • What it does: A DAF is essentially a charitable investment account into which you contribute assets, receive an immediate tax deduction, and then recommend grants to charities over time.
     • Appreciated Stock Donations: 
       • What it is: Appreciated stock donations are when you give publicly traded stock, bonds, or mutual funds that have increased in value since you purchased them directly to a qualified charity rather than selling them and donating cash. 
       • What it does: This allows you to avoid paying capital gains tax on the profits and potentially receive a charitable deduction for the full fair market value of the stock. This method is often more tax-efficient than selling the stock and donating cash. 
         • To ensure your donation qualifies for a tax deduction in 2025:
           • Credit card donations: Must be charged by December 31, 2025 (even if you pay the bill in 2026) 
           • Checks: Must be mailed by December 31, 2025 
           • Online transfers: Must be completed by December 31, 2025 
           • Stock transfers: Should be initiated well before year-end (allow 5-7 business days for processing)
         • Remember to always get a receipt from the charity. You’ll need it for your records.

What Makes These Strategies Tax Efficient?

1. QCDs (for those 70½+):
   • The transfer satisfies your required minimum distribution (RMD) and is not considered taxable income.
   • You avoid paying income tax on the IRA withdrawal.
   • This is particularly valuable if you don’t need the RMD income and would give to charity anyway.
   • It reduces your adjusted gross income, potentially reducing your tax bracket and eligibility for other taxes and penalties.
   • It’s beneficial for those who take the standard deduction instead of itemizing. 
   • It can help with Medicare premiums and other income-based calculations.
2. Donor-Advised Funds:
   • You get an immediate tax deduction when you contribute. That is useful in high-income years.
   • It avoids payment of capital gains tax.
   • Assets can grow tax-free within the fund.
   • Allows “bunching” of charitable deductions—making several years’ worth of donations in one year to itemize deductions, then taking the standard deduction in following years. 
   • You can take time deciding which charities to support later.
3. Appreciated Stock Donations:
   • You avoid paying capital gains tax on the appreciation.
   • You generally receive a fair-market-value deduction of up to 30% of your adjusted gross income with a five-year carry forward.
   • You offset capital gains from other investments and reduce your overall taxable income.
   • The charity receives the full value since they can typically sell the stock without paying capital gains tax.
   • This means more goes to charity and less to taxes.
   • It allows you to preserve your liquid assets.

Have Questions? Call for a Consultation with a Knowledgeable Estates and Trusts Attorney Today: 609-409-3500