Estate Planning Archives | CD Wealth Management

Your Year-End Financial Checklist: Moves to Make Before 2025 Ends

As we prepare to wrap up another year, it is the perfect time to review year-end planning strategies to ensure your wealth plan reflects changes in your circumstances or goals, the current tax environment, and the economic landscape.

The end of the year is an important time for making financial decisions that can have an impact in the year ahead — and for years to come. We recommend that you review the planning strategies below to consider and discuss.

Income Tax Strategies

Traditional year-end planning focuses on deferring income into a future year and accelerating deductions into the current year.

— If you anticipate being in a lower tax bracket next year:

• Defer income if possible so you can postpone paying the tax and have that income at a lower bracket.
• If you itemize on your tax return, bunch your medical expenses in the current year to meet the percentage of your adjusted gross income to claim those deductions.
• Make your January mortgage payment in December so you can deduct the interest on this year’s return.

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Tax-Related Investment Strategies

— Tax-loss harvesting is the strategy of selling securities at a loss to offset a capital gain liability, either for today or in the future. Securities must be sold by Dec. 31, the last trading day of 2025, to realize a capital gain or loss.

• Harvest losses by selling taxable investments. To avoid the IRS wash-sale rule, you must wait at least 31 days before buying back a holding that’s sold for a loss.
• Harvest gains by selling taxable investments if you have a tax loss carryforward.

— Make sure that you have satisfied your required minimum distributions (RMD).

• If you fail to take your RMD, this may result in a 25% penalty. (This is down from 50%.)
• If you own an inherited IRA, RMD may be required separately for that account as well. If you inherited an IRA after 2019, it must be depleted by the end of the 10th year. If the original owner of the IRA was already taking RMDs at the time of death, you must take an annual distribution in years 1-9, in addition to making sure the IRA is fully depleted in year 10.
• Beneficiaries of a Roth IRA do not have to take RMDs. However, the 10-year rule still applies, and the entire account must be fully distributed by the end of the 10th year.

Promo for an article titled Before You Sell for a Loss, Make Sure You Know the Wash-Sale Rule.

Retirement Planning Strategies

— Maximize your IRA contributions. You may be able to deduct annual contributions of up to $7,000 to your traditional IRA and $7,000 to your spouse’s IRA ($8,000 if over the age of 50).

— Make a Roth IRA contribution if you qualify under the applicable income limits.

— Consider increasing or maximizing your 401(k) contribution; the maximum for 2025 is $23,500 for those under age 50 and $31,000 for those 50 and older. Contributing more to your 401(k) can reduce your adjusted gross income while boosting your long-term retirement savings.

— New in 2025: If you are between 60 and 63, you can contribute an additional amount to your employer-sponsored retirement plan.

— Consider making contributions to a Roth 401(k) if your plan allows.

— Consider setting up a Roth IRA for each of your children who have earned income during the year.

Retirement Account Types

2025 Contribution Limits

Additional Age 50+ Catch-Up Contributions

Age 60–63 “Super Catch-Up” Contributions

401(k)

$23,500

$7,500

$3,750

SIMPLE IRA

$16,500

$3,500

$1,750

Traditional/
Roth IRA

$7,000

$1,000

N/A

Gifting Strategies

— Consider making gifts up to $19,000 per person, as allowed under the federal annual gift tax exclusion. You can give up to $19,000 this year to as many people as you want without triggering gift taxes. Note: Payments made directly to educational and/or medical institutions on behalf of your intended beneficiary do not count towards your annual exclusion amount — or against your lifetime estate tax exclusion.

— Create a donor advised fund for an immediate income tax deduction and provide immediate and future benefits to charity over time.

— If you already have a donor advised fund or want to donate to a charity, consider gifting appreciated assets that have been held longer than one year to get the fair market value income tax deduction while avoiding income tax on the appreciation.

— If over the age of 70½, consider making a direct transfer from an IRA to a public charity. The distribution is excluded from gross income, and you can give up to $108,000 as a tax-free gift from your IRA, which may fully satisfy RMD requirements.

— Consider combining multiple years of charitable giving into a single year to exceed the standard deduction threshold. This is called “bunching.” The chart below illustrates how bunching can reduce taxes if executed properly.

Bunching in 2025

Scenario: Donor has income of $750K, is in the 35% income federal tax bracket, files jointly as a married couple, and itemizes deductions.

Source: Fidelity Charitable. This is a hypothetical example for illustrative purposes only. This example does not take into account other deductions. Information herein is not legal or tax advice. As with any tax-planning strategy, there may be additional considerations that pertain to your personal situation. Other strategies may provide more flexibility and similar savings. Please consult your tax advisor.

Wrapping up 2025, Planning for 2026

— Discuss major life events with CD Wealth to confirm you have clarity in your current situation.

— Communicate with your CPA to provide capital gains and investment income information for a more accurate year-end projection.

— Check your Health Savings Account (HSA) contributions for 2025. If you qualify, you can contribute up to $4,300 (individual) or $8,850 (family) — and an additional $1,000 catch-up if over the age of 55.

2025 HSA Contribution Limits

Additional Age 55+ Catch-Up Contributions

Individual Coverage

$4,300

$1,000

Family Coverage

$8,850

$1,000

— Double-check your beneficiary designations for retirement plans, IRAs, Roth IRAs, annuities, and life insurance policies.

— If you do not already have identity theft protection, consider purchasing a service to help protect you and your family.

The end of the year is a perfect time to review your financial planning needs. This includes reviewing the investment portfolio, assessing year-end tax planning opportunities, reviewing retirement goals, and managing your legacy plans. The list above includes some of the items that may apply to you and your family.

We are happy to meet to discuss any of the above to ensure you remain on track with your financial goals.

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The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.

Sources: Fidelity

What to Expect Now That the ‘Big Beautiful Bill’ Has Become Law

On July 4, President Trump signed the “One Big Beautiful Bill” into law, which cements most of the tax cuts embedded in the 2017 Tax Cuts and Jobs Act (TCJA), along with some significant additional tax changes.

However, the primary question remains: What will be the long-term impact of this bill on the deficit? Let’s uncover what is inside this new tax law.

Permanent Changes

The following provisions will become a permanent part of the tax code, initially introduced in the original Tax Cuts and Job Act.

• The seven tax brackets with a top rate of 37% and a bottom rate of 10% will remain the same.
• The mortgage interest deduction will remain at its current limit of $750,000 in mortgage debt for joint filers ($375,000 for single filers).
• The State and Local Tax (SALT) deduction had been capped at $10,000. This will increase to $40,000 and then revert to $10,000 in 2030. The higher SALT cap will phase out for incomes over $500,000.
• The standard deduction will be made permanent and increase to $15,750 for single filers and $31,500 for joint filers. These amounts will be indexed for inflation after 2025.
• The lifetime gift and estate tax exclusions will increase to $15 million for single filers and $30 million for those who are married and filing jointly. The exclusions will be indexed for inflation going forward.
• The Child Tax Credit will be permanent and will increase to $2,200 per child starting in 2025.
• Those who do not itemize deductions can claim a deduction for charitable contributions of up to $1,000 ($2,000 for couples) starting in 2026.

Temporary Provisions (4 Years)

The legislation includes numerous temporary deductions and credits that are valid for tax years 2025 to 2028 only.

• Workers can deduct up to $25,000 in qualifying tip income and $12,500 in overtime pay ($25,000 for joint filers). These deductions phase out with income over $150,000 ($300,000 for joint filers).
• People who are 65 or older will get an additional $6,000 deduction that begins to phase out at an income of $75,000 for single filers and $150,000 for joint filers. This is in addition to the $2,000 deduction for single filers and $3,200 for joint filers.
• The new law allows for a deduction of up to $10,000 of loan interest for purchased vehicles whose final assembly took place in the U.S. The deduction would apply for single taxpayers with adjusted gross income of $100,000 or less ($200,000 for people filing jointly).

What Else Is New?

Other additions include a savings account for children and expanded usage for health savings accounts and 529 plans.

• Parents and relatives can now contribute up to $5,000 a year to a new savings account, called Trump accounts. Initially acting like a non-deductible IRA, contributions can be made until the beneficiary reaches the age of 18. Then, the account would effectively convert to a traditional IRA. Additionally, parents of newborns born between Jan. 1, 2025, and Dec. 31, 2028, would qualify for $1,000 in federal money to start the account.
• The legislation expands the use of 529 funds to include miscellaneous expenses such as testing fees, tutoring outside the home, and educational therapies, as well as tax-free withdrawals for recognized postsecondary credential programs.
• The legislation also broadens HSA eligibility by including more health plan types and participant categories.

The legislation does not eliminate taxes on Social Security benefits, which remain taxable up to 85% for individuals with income greater than $34,000, or $44,000 for a couple. However, the $6,000 deduction for those 65 and older may help offset taxes on Social Security benefits for some over the next four years.

Key Individual Tax Changes

Chart outlining the changes to tax law from the Big Beautiful Bill. — *Source: CNBC*

As you review the new tax legislation, it may be the perfect time to review your financial planning needs as well. This includes revisiting your investment portfolio, assessing tax planning opportunities, reevaluating retirement goals and managing your wealth transfer and legacy plans.

This summary of the new legislation contains merely a portion of the items that may apply to your family. We are always happy to meet and discuss any of the above to ensure that you remain on track with your financial profile and your goals.

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The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Sources: CNBC, Fidelity, Schwab

Transparency Over Illusion: The Case for Liquid Investments

Note: A PDF version of this article is available here.

At CD Wealth Management, our philosophy with investing is to focus on the liquid markets — Stocks (Individual Equities), Fixed Income (municipal bonds, corporate bonds, Treasuries, CDs), Index Funds (ETFs), Mutual Funds, and money markets. We are not investing our clients’ monies in alternative investments — either liquid alternatives or illiquid alternatives.

To use a golf analogy, we play in the fairway. We want to ensure that if a client needs their money, whatever holdings are in the portfolio could be sold that day. It is paramount that clients have access to their monies when needed.

The Case for Liquid Investments

The financial world offers no shortage of investment opportunities. Over the years, a trend has emerged that has become popular to discuss at cocktail parties or on the golf course: illiquid partnerships and private deals, framed as exclusive opportunities and high-return potential. While they may appear enticing, these arrangements frequently prioritize the interests of general partners over investors.

These private deals and investments do not carry the same level of regulatory oversight, transparency, and accountability.

By contrast, liquid investments operate under strict oversight by regulators such as the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). These regulatory bodies ensure transparency and protect investors. Failure to comply with the regulatory agencies may lead to serious consequences, including fines and/or imprisonment.

Liquid investments may not carry the same flashiness as private deals, but they are tried, tested, and proven.

What Are Liquid Investments?

Liquid investments are financial assets that can be bought or sold quickly and easily without significantly affecting their price. These assets are traded on public exchanges, offering real-time valuations and high levels of transparency. Examples include:

Stocks: Stocks represent ownership in publicly traded companies. Stocks allow investors to participate in the growth and profitability of businesses. They are traded throughout the day on exchanges like the NYSE or NASDAQ and are valued daily.

Bonds: Fixed-income securities are issued by governments, municipalities, or corporations. Bonds provide a stream of income through interest payments and are considered a much lower risk than stocks.

Marketable Securities: Mutual funds and exchange-traded funds (ETFs) are liquid investments designed to diversify portfolios while maintaining daily liquidity. ETFs can be sold throughout the day, like stocks, while mutual funds have daily liquidity at the end of the trading day.

Cash Equivalents: Assets like Treasury bills, money market funds or short-term certificates of deposit (CDs) are as good as cash. These provide immediate access to funds with minimal risk.

The front facade and sign of the New York Stock Exchange at wall street. — *Stocks are traded throughout the day on exchanges like the NYSE or NASDAQ and are valued daily, so investors can see the exact value of their holdings at any time.*

How Liquid Investments Work: The Value of Transparency and Management

Liquid investments operate with transparency:

Daily Valuation: Investors can see the exact value of their holdings at any time. This removes ambiguity and allows for informed decision-making.

Professional Asset Management: Investors pay a transparent management fee to professionals who manage their investments. Management fees for liquid investments are disclosed upfront and published online, providing complete transparency about costs. Unlike illiquid investments, managers of liquid assets do not take a share of the profits.

Accountability: Regulatory oversight by the SEC and FINRA ensures that managers act in the best interest of their clients. This eliminates conflicts of interest and ensures ethical behavior.

Accessibility: Investors can buy or sell these assets quickly and with minimal impact on their value, making them ideal for individuals who may need access to cash in emergencies or for other financial goals.

What Are Illiquid Investments?

Illiquid investments are financial assets that cannot be easily or quickly converted into cash. These investments often come with long lock-up periods, a lack of transparency, and high levels of uncertainty regarding their valuation. Investors in illiquid investments typically face challenges when they want to sell or redeem their investments, as there is no open market to provide daily liquidity.

Types of Illiquid Investments

Private Real Estate Deals: Investors pool money to purchase or develop properties, often in the form of limited partnerships. Returns are tied to property appreciation or rental income but often require years before seeing liquidity.

Oil and Gas Ventures: Investments in exploration, drilling, and extraction projects typically are structured as partnerships. They are highly speculative and dependent on volatile commodity markets. Organizers may offer tax advantages as incentives to invest in the project.

Private Equity Funds: A fund invests in privately held companies or leveraged buyouts of public companies. The fund typically invests in private companies with a predetermined investment strategy. The types of private equity strategies are venture capital or buyout funds. Illiquid by nature, these funds typically lock up money for seven to 10 years or more.

Venture Capital: These are early-stage investments in startups or small businesses, typically with a minority investment in the company. Returns are speculative and contingent on the company’s success.

Hedge Funds: Hedge funds are actively managed funds that use complex strategies to generate returns and protect against market losses. They often have lock-up periods and redemption restrictions, making them illiquid. They also charge higher fees and have fewer regulations.

Collectibles and Art: With investments in rare items like artwork, antiques, or wine collections, illiquidity arises from the difficulty in finding buyers and determining fair market value.

Real Assets: Tangible assets like timberland, farmland, or infrastructure investments typically require long-term commitments with limited liquidity.

Dictionary definition of hedge fund. — *Hedge funds use complex strategies to generate returns and often have lock-up periods and redemption restrictions, making them illiquid.*

How Illiquid Investments Work

General Partners with No Real Stake: In many private real estate deals, the general partner does not put their own money into the project. Instead, they use investor capital and bank loans, bearing little to no financial risk themselves. The general partner often takes a management fee and a significant share of the profits (sometimes 50% or more). This profit-sharing occurs even though the limited partners bear all the financial risk.

Leveraging Investor Capital: General partners use investor funds to secure loans, further leveraging the investment. If the project fails, investors lose their capital while the general partner remains protected.

Opaque Reporting: Illiquid investments often rely on unaudited reports produced by the general partner. These reports highlight irrelevant successes or inflated valuations while obscuring the true financial picture.

Lack of Oversight: Without SEC or FINRA oversight, investors have no external authority ensuring fair play or ethical behavior.

Why We Stay Away from Illiquid Investments

Lack of Transparency: Illiquid investments, such as private real estate deals, venture capital, and oil and gas partnerships, often lack daily pricing and rely on unaudited, self-reported valuations from general partners. This may leave investors in the dark about the true value of their investments and limits their ability to make informed decisions. Without regulatory oversight, there is no guarantee that reports are accurate or unbiased, creating a significant risk for investors.

Imbalanced Risk and Reward: In many illiquid investments, general partners contribute little to no capital but reap substantial rewards, including management fees and up to 50% of the profits. Meanwhile, limited partners bear all the financial risk. This misalignment of incentives can lead to decisions that prioritize the general partner’s interests over the investors’ interests, potentially resulting in losses or suboptimal outcomes for the limited partners.

Restricted Access and Estate Planning Challenges: Illiquid investments often come with long lock-up periods, tying up investor funds for years or even decades. This lack of accessibility can be problematic for those who need liquidity for personal reasons or to settle estates after death. Executors and heirs face delays, subjective valuations, and legal hurdles when trying to access or liquidate illiquid assets, adding unnecessary complexity and financial stress.

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A Stronger Conclusion: Transparency Over Illusion

Investing should never feel like guessing. Illiquid investments thrive on a lack of transparency, emotional manipulation, and the allure of exclusivity. Having a mix of liquid assets can help you achieve your financial goals while also providing a safety net in times of uncertainty when money may be needed most.

Understanding the pros and cons of each type of asset — liquid or illiquid — is critical in making informed decisions as to what is right for each person and family based on their financial needs.

In contrast, liquid investments offer:

•       Transparency
•       Accessibility
•       Accountability
•       Ownership of Profits
•       Estate Planning Simplicity

When it comes to your financial future, the choice is clear: Choose transparency, accountability, and liquidity. Your wealth deserves nothing less.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Sources: Blackstone, Fidelity, Investopedia, Schwab

Revisiting the Year’s Most Valuable Insights for Our Clients

As 2024 draws to a close, we wanted to take this occasion to look back at the articles we’ve produced for our clients so far this year and share the 10 most popular pieces, in case you missed any of them — or if you want to revisit and share them with friends and family.

Every two weeks, we thoughtfully craft these pieces with our clients in mind, broaching subjects we think are relevant and interesting. This is not syndicated content. We want you to find value in these letters — especially in times like these.

1. Understanding How a Living Trust Can Help Your Estate Planning

June 20: A living trust is a flexible, popular tool that allows the estate to avoid probate and lets you control asset distribution after your death. Read more

2. Another Milestone for the Dow: What Could Happen Next?

Stock market data with uptrend vector. 3d render.

May 23: The Dow’s rise to 40,000 is a reminder that when it comes to investing, patience is the key. Read more

3. Here’s Why Investors Shouldn’t Panic Over the Market’s New Year’s Hangover

Jan. 12: We talk regularly about not timing the market, and we don’t see these circumstances any differently. Read more

4. Election Advice for Investors: Ignore the Noise, Focus on the Big Picture

Oct. 31: Presidential elections historically have had very little impact on the stock market. Read more

5. What Investors Should Know About This Week’s Market Pullback

financial stock market graph chart of stock market investment trading screen.

Aug. 8: Remember that volatility is normal and that the market does not go up in a straight line. Read more

6. The Market’s Recovery Puts August Pullback in the Rearview Mirror

Businesswoman in suit drawing stock analytics interface on virtual screen. Business and financial success concept.

Aug. 22: More often than any other month, August is when we tend to see out-of-the-blue volatility in the stock market. Read more

7. Here’s How We’re Rebalancing the Portfolio as We Enter the Second Quarter

Smiling mature couple meeting with bank manager for investment. Beautiful mid adult woman with husband listening to businessman during meeting in conference room in modern office. Happy middle aged couple meeting loan advisor to buy a new home.

March 15: We think much of the pain from rising interest rates is behind us — and the key to navigating volatility remains being in a diversified portfolio. Read more

8. Investor Outlook: A Strong May, the First 100 Trading Days and 4 Scams to Watch

Male manager businessmen are looking at the tablet screen with the company's financial information and he is tense about the performance.

June 6: S&P 500 companies are enjoying their best earnings season in almost two years. Read more

9. The Fed’s Next Move: What Could Rate Cuts Mean for Investors?

Federal Reserve Chairman Jerome Powell speaking on stage.

Sept. 5: Investors who stay only in short-term investments may risk an opportunity to lock in higher yields. Read more

10. How To Make the Biggest Impact With Your Charitable Donation

Sept. 19: Giving can offer a financial benefit for you and your family — as well as the intangible rewards that come with helping others. Read more

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

The Bull Market, a Big November & 2025 Inflation Adjustments

November was a big month for stocks! The Dow closed above 45,000 for the first time, and the S&P 500 hit 6,000 for the first time. Small-cap stocks rose almost 11% during the month.

Optimism over lower taxes, a stronger economy and strong earnings were the likely reasons for the month’s great showing. So far in 2024, the S&P has made 56 new all-time highs. The S&P is up more than 25% for the year — and for the first time since 1998, it’s up more than 20% in back-to-back years.

The current bull market is 26 months old and up more than 70% from lows in mid-October 2022. The good news is that once previous bull markets get to this point, there can still be additional room to go higher. Over the past 50 years, five other bull markets have lasted more than two years. The shortest lasted five years, and the longest lasted more than 12 years.

Bull Markets Beyond Their Second Birthday

Chart showing the duration of bull markets since 1950. — *Source: FactSet, Carson Investment Research 12/6/24*

Here are some fun market tidbits to end the year:

1. The “Santa Claus rally” is the typically encouraging period that includes the last five trading days of December and the first two trading days of the new year.
2. December typically is the S&P 500’s second-best month in an average election year, trailing only November.
3. On average, December is the third-best month, behind April and November.
4. Going back to 1950, December has been positive 75% of the time.

Santa brings gifts — and not always in the form of market returns. The IRS recently released its inflation adjustments for 2025 related to personal income tax, retirement contributions, estate taxes and Social Security benefits. While these changes won’t affect tax returns due in April, they will be very helpful in planning for 2025.

Personal Income Tax

The standard deduction is increasing in 2025, which could mean a bigger tax break for you. The new standard deduction for 2025 is:

• Married filing jointly: $30,000, an increase of $800
• Single taxpayers and married individuals filing separately: $15,000, up $400
• Heads of Households: $22,500, an increase of $600
• In addition, retired married couples (both age 65+) filing jointly, will receive an additional standard deduction of $3,200 ($1,600 each)! This may make it more difficult to itemize deductions in 2025. We will want to keep this in mind with charitable giving to consider a bunching strategy.

For tax year 2025, the top tax rate remains 37% with income greater than $751,600 for married filing jointly ($626,350 for single taxpayers). The other tax brackets are:

• Incomes over $501,050 for married filing jointly ($250,525 for single): 35%
• Incomes over $394,600 for married filing jointly ($197,300 for single): 32%
• Incomes over $206,700 for married filing jointly ($103,350 for single): 24%
• Incomes over $96,950 for married filing jointly ($48,475 for single): 22%
• Incomes over $23,850 for married filing jointly ($11,925 for single): 12%
• Incomes less than $23,850 for married filing jointly ($11,925 or less for single): 10%

Retirement Savings Contributions

The 401(k)-contribution limit is increasing by another $500 to $23,500. The maximum contribution for certain profit-sharing plans is increasing to $70,000.

Traditional and Roth IRA contribution limits are staying the same at $7,000. In 2025, for those under the age of 50, the cap will remain at $7,000. Married couples with income below $236,000 will be able to make a full Roth contribution in 2025 ($150,000 for those who are single). Phaseout ranges are changed for 2025; couples with income over $246,000 will not be eligible to contribute to a Roth IRA.

While catch-up contributions for participants 50 and older will remain at $7,500, the IRS is introducing a new super catch-up contribution limit for older employees. Beginning in 2025, individuals age 60-63 can contribute an additional $3,750 to their employer-sponsored retirement plans, for a total catch-up amount of $11,250.

The backdoor Roth IRA option remains a viable choice. The first step is to contribute to a Traditional IRA; this is a non-deductible contribution. After the traditional IRA contribution is completed, you can convert those funds to a Roth IRA.

If the original contribution to a traditional IRA was not deductible, then the conversion of that amount is non-taxable. However, any growth on that amount between the contribution and the conversion dates would be taxable. Completing the backdoor Roth transaction can be a tricky process, and you will want to consult your financial advisor and CPA.

Please make sure you adjust your 401(k) plan to account for the increased contribution limit.

Social Security

Social Security benefits will increase 2.5% in 2025, an average increase of almost $48 per month. This adjustment is smaller when compared to the 5%-8% increases that were in response to higher inflation in recent years.

Estate Taxes and Gifting

The gift tax annual exclusion is increasing from $18,000 to $19,000 for 2025, the fourth consecutive year that the gift limit has increased. Individuals can gift up to this amount to any number of individuals in 2025 without incurring gift tax or using any of the taxpayer’s lifetime exemption. Married couples can use this exemption, allowing them to gift up to $38,000 annually to each recipient in 2025.

In addition, the lifetime exemption amount increased about $380,000 per person, to $13.99 million per individual. This increase means that a married couple can shield a total of $27.98 million from federal estate or gift tax. This exemption is still set to sunset by about 50% at the beginning of 2026. Remember, however, that certain kinds of planning strategies can take months or even years to implement.

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The end of the year is a perfect time to review your financial planning needs. This includes reviewing the investment portfolio, assessing year-end tax planning opportunities, reviewing retirement goals, and managing your legacy plans. The above changes for 2025 may apply to you and your family. We are happy to meet to discuss any of the above to ensure that you remain on track with your financial goals.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Sources: Baird, Carson, Fidelity, Schwab

Year-End Suggestions to Help You Save More and Reduce Your Taxes

With the election in the rearview mirror, we are entering the home stretch for 2024. The end of the year is an important time for making financial decisions that can have an impact not only in the new year ahead, but for years to come.

As 2025 approaches, now is the perfect time to review planning strategies to ensure that your wealth plan reflects any changes in your circumstances or goals, the current tax environment and the economic landscape.

We recommend that you review the checklist below for ideas to consider and discuss.

Income Tax Strategies

1. If you anticipate your marginal income tax bracket to increase next year, you may consider accelerating income into 2024 and deferring deductions to 2025.

2. If you anticipate being in a lower tax bracket next year:

• Defer income (if possible) to postpone paying the tax and to have that income at a lower bracket.
• If you itemize on your tax return, bunch your medical expenses in the current year to meet the percentage of your adjusted gross income to claim those deductions.
• Make your January mortgage payment in December so you can deduct the interest on this year’s return.

Tax-related Investment Strategies

1. Tax-loss harvesting is the strategy of selling securities at a loss to offset a capital gain liability, either for today or in the future. Securities must be sold by Dec. 31, the last trading day of 2024, to realize a capital gain or loss.

• Harvest losses by selling taxable investments. Note: You must wait at least 31 days before buying back a holding that is sold for a loss to avoid the IRS wash-sale rule.
• Harvest gains by selling taxable investments if you have a tax loss carryforward.

2. Ensure that you have satisfied your required minimum distributions (RMD).

• If you fail to take your RMD, this may result in a 25% penalty (down from 50%).
• If you own an inherited IRA, an RMD may be required separately for that account as well. If you inherited an IRA after 2019, the inherited IRA must be depleted by the end of the 10th year. Beginning next year, certain beneficiaries must take an annual distribution over the 10-year period following inheritance, instead of waiting to distribute the entire amount until the 10th year.

Retirement Planning Strategies

1. Maximize your IRA contributions. You may be able to deduct annual contributions of up to $7,000 to your traditional IRA and $7,000 to your spouse’s IRA ($8,000 if over the age of 50).

2. Consider increasing or maximizing your 401(k) contribution. The maximum contribution in 2024 for those under 50 is $23,000, and for those over 50, the maximum contribution is $30,500. Boosting contributions to your 401(k) can lower your adjusted gross income while increasing your retirement savings.

3. Consider making contributions to a Roth 401(k) if your plan allows.

4. Consider setting up a Roth IRA for each of your children who have earned income during the year.

Gifting Strategies

1. Consider making gifts of up to $18,000 per person as allowed under the federal annual gift tax exclusion. You can give up to $18,000 this year to as many people as you want without triggering gift taxes. Payments made directly to educational and/or medical institutions on behalf of your intended beneficiary do not count towards your annual exclusion amount — or against your lifetime estate tax exclusion.

2. Create a donor advised fund for an immediate income tax deduction and provide immediate and future benefits to charity over time.

3. If you already have a donor advised fund or want to donate to a charity, consider gifting appreciated assets that have been held longer than one year to get the fair market value income tax deduction while avoiding income tax on the appreciation.

4. If you are over the age of 70½, consider making a direct transfer from an IRA to a public charity. The distribution is excluded from gross income, and you can give up to $105,000 as a tax-free gift from your IRA that may fully satisfy RMD requirements.

5. Consider combining multiple years of charitable giving into a single year to exceed the standard deduction threshold. This is called “bunching.” The chart below illustrates how it can reduce taxes if executed properly.

Wrapping Up 2024, Planning for 2025

1. Discuss major life events with your team at CD Wealth to confirm you have clarity in your current situation.

2. Communicate with your CPA to provide capital gains and investment income information for a more accurate year-end projection.

3. Check your Health Savings Account (HSA) contributions for 2025. If you qualify, you can contribute up to $4,300 (individual) or $8,550 (family), plus an additional $1,000 catch-up if you are over 55.

4. Double-check your beneficiary designations for retirement plans, IRAs, Roth IRAs, annuities and life insurance policies.

5. If you do not already have identity theft protection, consider purchasing a service to help protect you and your family.

The end of the year is the perfect time to review your financial planning needs.

This includes reviewing the investment portfolio, assessing year-end tax planning opportunities, reviewing retirement goals, and managing your legacy plans.

The checklist above includes just some of the items that may apply to you and your family. We are happy to meet with you to discuss any of the above and to ensure that you stay on track with your financial goals.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Sources: Capital Group, Fidelity, Schwab

How To Make the Biggest Impact With Your Charitable Donation

Today is North Texas Giving Day, an important occasion in our community — and an annual reminder to think about making charitable donations for both philanthropic and tax purposes! No matter what your interests are, making gifts to causes you care about can be one of the most meaningful uses of your money.

In the end, what really matters is helping an organization that matters to you. The tax benefits from a donation are just icing on the cake.

Charitable giving can offer a financial benefit for you and your family as well as the intangible rewards that come with helping others. Most donations to charitable organizations come in the form of checks or credit card payments. However, there may be more efficient ways to donate, which in turn can help both the charity and your pocketbook.

Understanding the benefits for different types of donations is important.

Cash, Check or Credit Card

These are the most simple and straightforward ways to donate to charity. It is important for you to keep a receipt from the charity or a bank record to substantiate cash gifts.

For contributions made in 2024, the annual income tax deduction limit for cash gifts to public charities is 60% of adjusted gross income (AGI). If you make contributions in excess of those limits, you can carry over the excess for up to five years until it is all used, but not beyond that time.

If you do not have appreciated assets to give or if you want to give cash, you may find that the total of your itemized deductions will be slightly below the standard deduction. In that case, it could be beneficial to combine or bunch several years of tax contributions into one year.

Appreciated Stock

With the stock market gains over the last two years, donating appreciated assets such as stock can have tremendous advantages. Donors can deduct gifts of stocks that have been held more than a year (long enough to qualify as long-term capital gains) at the fair market value, rather than at the purchase price.

The downside is that your deduction can offset only up to 30% of your AGI. If you donate stocks you have held for less than one year, you will receive a deduction for their cost basis, rather than fair market value. However, the deduction can offset up to 50% of AGI.

Often, donors may gift the stock with the biggest winnings, which maximizes savings on capital gains, and then buy back the same stock with cash — which in turn raises the cost basis. If you happen to own a stock or mutual fund for more than one year and do not have the cost basis, this holding can be ideal for donation to charity.

The chart below shows the difference between selling appreciated stock and then donating cash to charity, compared to gifting appreciated stock. Not only would the individual save on taxes, as the charity does not pay capital gains tax, but the charity would also receive additional monies!

This example is hypothetical and for illustrative purposes only. The example does not take into account any state or local taxes or the Medicare net investment income surtax. The tax savings shown is the tax deduction multiplied by the donor’s income tax rate (24% in this example) minus the long-term capital gains taxes paid.

IRA Qualified Charitable Distributions (QCD)

This is an option only for donors over the age of 70 1/2. Qualified Charitable Distributions allow individuals to donate up to $105,000 annually (up from $100,000 last year) directly from an IRA. Donor Advised Funds are excluded from this charitable donation; it must go to a qualified charity.

The QCD reduces the value of the IRA and does not count towards the donor’s taxable income. It also counts toward satisfying the annual required minimum distribution. In 2024, donors can also direct a one-time QCD of up to $53,000 to a charitable remainder trust or charitable gift annuity.

Donor Advised Fund (DAF)

Picture a donor advised fund as your family foundation, without the headache and administrative hassle of setting up a family foundation. A donor advised fund is a charitable account established at a public charity or community foundation that allows donors to recommend grants over time. The donor decides the timing of the donation, the charity that will receive the donation and the amount of the donation made from the DAF. The donor claims the tax deduction upon funding of the donor advised fund.

There is not a requirement that the DAF must distribute 5% of the fund each year, which may allow the DAF to grow, expanding the available dollars to donate to charities. Donor advised funds also can be a charity beneficiary of IRA assets.

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At CD Wealth Management, charitable giving plays a significant part in our company’s culture. We believe in giving back to the community, with our time as well as our pocketbook. We support many causes in the Dallas/Fort Worth Metroplex and encourage our team members to get involved.

During the holiday season every year, we make a donation in each of our team members’ names to their charity of choice as a form of gratitude that also helps a great cause. It is part of who we are as a firm — and who we are as individuals.

Please do not hesitate to reach out to us to discuss options to help you determine the best way to make the most of your charitable donations. Remember to visit the North Texas Giving Day website and look for your favorite charity. (Please note: all funding options above may not be available.)

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Sources: Fidelity, Schwab, Investopedia

Our Top Articles of 2024 So Far: Did You Miss Any?

Now that we’re past the halfway point of 2024, we wanted to take this occasion to look back at the articles we’ve produced for our clients so far this year and share the five most popular pieces, in case you missed any of them — or if you want to revisit and share them with friends and family.

Twice a month, we thoughtfully craft these pieces with our clients in mind, broaching subjects we think are relevant and interesting. This is not syndicated content. We want you to find value in these letters — especially in times like these.

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1. Understanding How a Living Trust Can Help Your Estate Planning

June 20 | A living trust is a flexible, popular tool that allows the estate to avoid probate and lets you control asset distribution after your death. Read more

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2. Another Milestone for the Dow: What Could Happen Next?

May 23 | The Dow’s rise to 40,000 is a reminder that when it comes to investing, patience is the key. Read more

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3. Here’s Why Investors Shouldn’t Panic Over the Market’s New Year’s Hangover

Jan. 12 | We talk regularly about not timing the market, and we don’t see these circumstances any differently. Read more

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4. Here’s How We’re Rebalancing the Portfolio as We Enter the Second Quarter

March 15 | We think much of the pain from rising interest rates is behind us — and the key to navigating volatility remains being in a diversified portfolio. Read more

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5. Investor Outlook: A Strong May, the First 100 Trading Days and 4 Scams to Watch

June 6 | S&P 500 companies are enjoying their best earnings season in almost two years. Read more

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P.S. Looking for more? Here are the five articles that are most popular this year on our website (no matter when they were published).

1. The Importance of Compound Interest and Tax Planning on Your Portfolio (Sept. 8, 2022)
2. You’ve inherited an IRA. What happens next? (April 14, 2022)
3. Understanding the 10-Year Treasury and Why It Matters to Investors (Nov. 2, 2023)
4. Understanding How a Living Trust Can Help Your Estate Planning (June 20, 2024)
5. Before you sell for a loss, make sure you know the wash-sale rule (May 5, 2022)

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The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

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This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS. Investor Disclosures: https://bit.ly/KF-Disclosures

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

Fidelity Investments and Fidelity Institutional® (together “Fidelity”) is an independent company, unaffiliated with Kestra Financial or CD Wealth Management. Fidelity is a service provider to both. There is no form of legal partnership, agency affiliation, or similar relationship between your financial advisor and Fidelity, nor is such a relationship created or implied by the information herein. Fidelity has not been involved with the preparation of the content supplied by CD Wealth Management and does not guarantee, or assume any responsibility for, its content. Fidelity Investments is a registered service mark of FMR LLC. Fidelity Institutional provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC.

Understanding How a Living Trust Can Help Your Estate Planning

As part of the financial planning process, we discuss the pros and cons of trusts — and your options in creating them: whether they are revocable or irrevocable, how much control a trust has, and what the long-term goal of a trust is. The term “trust” can be confusing for many regarding an estate plan, as there are many different types of trusts. Numerous estate planning tools can help make your estate run more smoothly while you are alive — and after your death.

People use trusts to keep control of their money and property and to designate who receives money and property when they die. A living trust is ineffective until the person who creates the trust puts their money or assets into it. Then, the trustee has authority over the assets.

There are three main roles under trusts:

• Grantor, Settlor or Trustor: the person who makes the trust.
• Trustee: the person who makes decisions about property and money in the trust. In a revocable trust, the person who made the trust (grantor) typically also is the trustee. If it is a joint trust, there can be co-trustees, such as a spouse.
• Beneficiaries: the people who receive money or property from the trust. The person who makes the revocable trust could also be the beneficiary while they are alive. After the grantor passes, the people who receive money or benefits from that trust are the residual beneficiaries.

A living trust can also be called a revocable trust or revocable living trust. A revocable trust can be amended or terminated at any time, but upon the death of one or both creators of the trust, it can then become irrevocable. Think of this type of trust as an extension of yourself (or your spouse if it is a joint trust).

There is no separate tax identification number and there are no tax benefits. You are still filing these assets as if they are owned in a regular joint account. You may be able to transfer most types of assets — such as your home, bank accounts, brokerage accounts and investment properties — into a revocable living trust.

The trust owns the property in title, but you maintain control of the assets and in most cases, you can use the trust property in the same way you had before transferring it into the trust.

What are the main reasons to use a revocable living trust?

There are two main benefits of utilizing a revocable living trust: to avoid or reduce the probate estate and to control the distribution of your assets.

Probate is the court-supervised process of administering your assets after your death. The process can be time-consuming and expensive, and the assets could remain tied up in court with your heirs not having access to funds in a timely manner. (During the pandemic, for example, probate courts fell significantly behind schedule, and assets were tied up for longer than expected.)

As your will goes through the probate process, it is made public. Anyone could go to the courthouse and read the will to see who gets your assets. If you put your assets in a revocable trust, however, your assets and beneficiaries remain private.

When assets go through probate, the court ultimately decides who gets what assets. If your assets are held in a living trust, however, you can avoid probate and control the timing and distribution of the assets. When you pass away, the person you appoint successor trustee will be legally responsible for distributing the assets according to the terms you specify in the trust document.

What are other considerations of a living trust?

• There are costs associated with setting up a living trust, such as paying an estate attorney to draft the legal documents. Another potential cost is changing ownership of certain assets, such as real estate. If you are moving your home into the revocable trust, a deed must be filed, and that may cost money as well.

• There are typically no income tax benefits associated with a living trust. Even though the assets have been transferred into a trust, you still will be subject to income taxes generated by the trust.

• A living trust is only one part of an overall estate plan. You still will need to take precautions such as preparing your last will and testament, establishing power of attorney, outlining medical directives, creating a living will and assigning HIPPA authorization.

Living trusts are among the most flexible and popular estate-planning vehicles. They are revocable, and you can change them as often as you would like. They can preserve your privacy, allowing the estate to avoid the probate process and enabling you to control how your assets will be distributed after your death — very similar to your retirement accounts.

Please let us know if you have any questions about revocable living trusts. We are always happy to discuss the pros and cons and help you decide if they are a sensible alternative for you.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Sources: Forbes, JP Morgan

Promo for an article titled Investor Outlook: A Strong May, the First 100 Trading Days and 4 Scams to Watch.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.

As the Market Soars, Now’s the Time to Review Your Estate Plan

The Federal Reserve held interest rates steady last week and — more importantly to the stock market — is sticking with its forecast of three interest rate cuts this year. This was the fifth meeting in a row that the Fed left rates unchanged, following 11 consecutive meetings with rate increases.

The forecasted rate cuts would be the first reductions since the early days of the pandemic in March 2020. The Fed also raised its projections for GDP growth this year and now sees the economy running at a 2.1% annualized rate. All three major U.S. stock indexes finished at their highest closing levels ever for the first time in more than two years. The last time all three indexes closed at record highs on the same day was Nov. 8, 2021.

Federal Funds Target Rate, July 2000-March 2024

Chart showing the Federal Funds Rate from July 2000 to March 2024. — Note: From December 2008 to present, the chart reflects the midpoint of the Federal Reserve’s target range. The target rate began in 1982. Source: Federal Reserve Bank of New York. Target rate as of March 20, 2024.

The most recent consumer price index (CPI) data for February came in hotter than expected for the second straight month. Inflation has eased significantly since it hit 9% in 2022. It has stalled at just over 3% in recent months, still well above the Fed’s 2% target rate.

Shelter remains the largest driver of inflation. While energy prices have gone up the last few months (as you’ve seen at the pump), it is nothing compared to what we saw in 2022. Food prices have shrunk significantly, which is a good sign for potential lower inflation going forward.

Overall, inflation’s downtrend from late last year is still intact.

CPI Inflation Has Eased, but Stays High on the Back of Shelter

Chart showing the sectors that affect CPI inflation since September 2021. — Data source: Carson Investment Research, BLS 3/12/2024. Pandemic-impacted categories include car and truck rentals, furnishings and supplies, apparel, airline fares, lodging away from home including hotels and motels. Housing includes rent of primary residence and owners’ equivalent rent. Medical care includes medical care commodities and services.

With stocks trading at all-time highs, now is a good time to review your estate plan. The federal lifetime estate and gift tax exemptions are set to be cut in half unless Congress acts before Jan. 1, 2026. A decrease in the exemption amount could result in significant transfer taxes for families with taxable estates.

In 2017, the Tax Cuts and Job Act increased the exemption. In 2024, the exemption amount increased from $12.92 million to $13.61 million per person (combined $27.22 million for a married couple). Should the provision sunset at the end of 2025, exemptions will revert to 2017 levels, adjusted for inflation, which would be about half of what they are today (roughly $14 million for a married couple).

It is uncertain if Congress will act before 2026. Until this happens, it may be wise to explore options to use the current exemption amount.

The IRS has confirmed that using the larger exemptions amount cannot be “clawed back” after the potential sunset. For example, if a person uses more exemption during their lifetime than is available at death due to a change in the exemption amount, the IRS cannot impose an estate tax on those excess gifts as a part of the taxpayer’s estate when they pass.

Here are a couple of ideas to discuss to plan for a potential change:

Dynasty Trust

A dynasty trust, or perpetual trust, is designed to pass on wealth from one generation to the next without incurring transfer taxes.

Dynasty trusts are irrevocable, and their terms cannot be changed once funded. They allow for potential tax-free transfer of assets to beneficiaries. The trust will define the way each beneficiary receives distributions and what should happen at their passing.

Assets can be held in trust for multiple generations, depending on the state where the trust is established.

Spousal Lifetime Access Trust

A spousal lifetime access trust (SLAT) allows access to assets while keeping them out of your taxable estate. Married taxpayers can consider naming their spouse as the lifetime beneficiary of their trust.

With this type of trust, the taxpayer would gift assets to a trust established for the benefit of their spouse and descendants. The spouse can receive trust income and defined portions of the principal, giving the taxpayer access to trust assets for duration of the marriage.

It is important to note that both trusts are irrevocable, and the taxpayer must be willing to give up control of the assets to obtain the gift of the estate tax benefit of the gift or bequest.

With portfolio values at or near all-time highs, it may make sense to act sooner rather than later. If you have any questions about the best way to potentially navigate changes to the current transfer tax exemption amounts, please do not hesitate to contact our team.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client.

Sources: CNBC, Carson, Kestra

Promo for an article titled Here's How We're Rebalancing the Portfolio as We Enter the 2nd Quarter.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.