New Year Financial Checklist: 7 Things to Consider

As you embark on a divorce, the myriad of details you must attend to can be daunting. Organizing those details into segments can make the job much more manageable. The new year brings a season of change that can spur one of those segments of details – taking a look at what has changed, and what needs to be changed for the new year. The end of one year and the beginning of another makes us think about last-minute things we need to address and good habits we want to start keeping.

New Year Financial Checklist: 7 Aspects of Your Financial Life to Consider

Use this new year financial checklist to remind you of the following key items you need to consider or change during your divorce process.

1. Your Investments

Review your approach to investing and make sure it suits your objectives. Look over your portfolio positions and revisit your asset allocation.

2. Your Retirement Planning Strategy

Does it seem as practical as it did a few years ago? Are you able to max out contributions to IRAs and workplace retirement plans like 401(k)s? Is it time to make catch-up contributions?

3. Review Any Sales of Appreciated Property

This includes both realized and unrealized losses and gains. Take a look back at last year’s loss carry-forwards. If you’ve sold securities, gather up cost-basis information. Look for any transactions that could potentially enhance your circumstances.

4. Your Charitable Gifting Goals

Plan contributions to charities or education accounts, and make any desired cash gifts to family members. The annual federal gift tax exclusion is $15,000 per individual for 2021 (rising to $16,000 in 2022), so you can gift up to $15,000 to as many individuals as you like this year without tax consequences. A married couple can gift up to $30,000 tax-free to as many individuals as they wish. You can make this gift in one transaction or a series of transactions.

These gifts won’t count against your lifetime estate and gift tax exclusion, and the recipient won’t owe any federal taxes on the gift or gifts.

The lifetime exemption for estate and gift taxes, currently $11.7 million per person, is scheduled to be cut in half after 2025 – unless Congress either reduces it sooner or agrees to keep it at this level.

You can choose to gift appreciated securities to a charity. If you have owned them for more than a year, you can deduct 100% of their fair market value and legally avoid the capital gains tax you would normally incur from selling them.

Besides outright gifts, you can plan other financial moves for your family – you can create and fund trusts, for example. The end of a year is a good time to review any trusts you have in place.

5. Your Life Insurance Coverage

Are your policies and beneficiaries up-to-date? Review premium costs, beneficiaries, and any and all life events that may have altered your coverage needs.

6. Speaking of Life Events…

Did you happen to get married or divorced in 2021? Did you move or change jobs? Buy a home or business? Did you lose a family member, or see a severe illness or ailment affect a loved one? Did you reach the point at which Mom or Dad needed assisted living? Was there a new addition to your family? Did you receive an inheritance or a gift?

7. Did You Reach Any of These Financially Important Ages in 2021?

If so, act accordingly.

• Did you turn 72 this year? If so, you must take your first Required Minimum Distributions (RMDs) from your IRA(s). If you reached 70½ in 2020, you have to take your first RMD by April 1 of the year after you reach the age of 72.
• Did you turn 65 this year? If so, you’re now eligible to apply for Medicare.
• Did you turn 62 this year? If so, you’re now eligible to apply for Social Security benefits. You can start taking distributions from your retirement benefits as early as age 62 or as late as age 70.
• Did you turn 59½ this year? If so, you may take IRA distributions without incurring a 10% penalty.
• Did you turn 55 this year? If so, and you also retired this year, you may now take distributions from your 401(k) account without penalty.
• Did you turn 50 this year? If you were age 50 or over at the end of the calendar year, you can start making annual “catch-up” contributions to your IRAs (and certain qualified retirement plans).

It’s a new year – get ready to take control of a new you embarking on a new journey towards an even better tomorrow!