End-of-Year Estate and Tax Planning: Preparing for Changes and Opportunities
As the year winds down, it's the perfect time to review your estate and tax planning, ensuring your strategy still aligns with your evolving goals and life changes!
Year-end planning extends far beyond simply checking boxes for tax deductions or organizing paperwork. It's about protecting the people and values that matter most to you. With the ever-changing tax laws and the twists and turns of life, taking a fresh look at your estate plan gives you confidence that your wishes will be honored, no matter what comes your way.
Teamwork Makes the Dream Work
Estate and tax planning work best when you have the right professionals in place. We recommend assembling a team that includes an estate planning attorney, a CPA, a financial advisor, and an insurance agent. Each brings a unique perspective and set of skills.
This teamwork approach is especially important for tax strategies. Take gifting, for example, your CPA can identify opportunities to reduce your tax liability with carefully planned gifts. At the same time, your estate planning attorney ensures these gifts are set up correctly within the framework of your overall estate plan. Insurance can also add an extra layer of security.
By coordinating the strengths of your professional team, you gain the advantage of spotting new opportunities and avoiding potential mistakes.
Year-End Tax Planning
Reviewing your tax strategy in sooner rather than later is smart because many strategies must be implemented by December 31st to affect the current tax year. Waiting until mid-December significantly limits your options.
Work with your CPA to identify opportunities for reducing your taxable estate or managing capital gains. Common strategies may include converting traditional IRAs to Roth IRAs, maximizing contributions to 529 education savings plans, or implementing gifting strategies that utilize annual exclusion limits.
Then your estate planning attorney can help structure these strategies through appropriate trust arrangements or specific language in your will. The goal is to ensure that tax-saving strategies align with your overall estate planning objectives and don't create unintended consequences for your beneficiaries.
Review Existing Documents
Your estate plan is definitely not a "set it and forget it" arrangement. Life changes, laws evolve, and your documents need to keep pace with both.
Estate planning professionals recommend reviewing your documents every three years; however, specific life events should trigger an immediate review. These include:
The birth or adoption of a child
Marriage or divorce
The death of a beneficiary or appointed guardian
Significant changes in your financial situation
If someone you've named in your documents becomes incapacitated.
During your review, ask yourself key questions about each document. Are the people you've designated as your power of attorney, healthcare proxy, and trustee still appropriate choices? Are they still available, willing, and capable of serving in these roles? Have your beneficiaries' circumstances changed in ways that might affect your distribution plans?
Don't forget to examine specific bequests in your will. If you've left a particular bank account to someone, ensure that the account still exists and hasn't been merged or closed. These seemingly small details can have significant consequences if overlooked.
Review Beneficiary Designations
Here's something many people don't realize: beneficiary designations on retirement accounts, life insurance policies, and transfer-on-death accounts control what happens to those assets, regardless of what your will says.
If your IRA lists your ex-spouse as the beneficiary but your will states it should go to your children, your ex-spouse may receive the account. In many circumstances, the beneficiary designation takes precedence over the instructions in your will.
During your year-end review, verify that all beneficiary designations reflect your current wishes. This includes 401(k) accounts, IRAs, life insurance policies, bank accounts with payable-on-death designations, and investment accounts with transfer-on-death provisions.
Special Considerations for Families with Children
If you have minor children, your year-end review should also include a careful look at your guardianship provisions. It's important to consider whether the people you named as guardians are still the best fit for your family.
Sometimes, life changes — such as a move to a different city, a shift in health or circumstances, changes in family relationships, or even differences in your children's personalities and needs — may mean that your original choices are no longer ideal. For example, a guardian who was once nearby may have relocated, or a close friend who agreed to serve may now have other responsibilities that make it difficult for them to take on the role.
Reach out to those you've designated as guardians and have an open conversation. Confirm that they are still willing and able to take on this responsibility, and be sure their circumstances haven't changed in a way that might affect their capacity to serve. Open communication can help avoid confusion or stress in the future and ensures that your children will be cared for by someone you trust if the unexpected happens.
Start 2026 with Confidence
As you complete your year-end estate and tax planning review, create a system for staying organized throughout the upcoming year. For example, plan to update your list of accounts and assets quarterly and maintain clear records of any gifts you make.
Your year-end planning efforts today create a foundation for peace of mind in the year ahead. By taking the time now to review, update, and coordinate your estate and tax planning strategy, you ensure that your wishes will be honored and your loved ones will be protected, no matter what the future brings.