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by Seth Larreau

A new year often means new resolutions for starting or restarting healthy habits, including with our finances. The beginning of the year is a great time to start building a comprehensive financial plan, or if you already have one, to look at ways to give it a refresh.

Your financial plan should be influenced by your unique life experiences and circumstances, and should dive into your near-term and legacy goals. Of course, developing the right plan can take time, which makes it important to know where to focus your attention. These are the three areas to keep in mind when you review your plan this year.

Life transitions

When planning your retirement or the transition of your business, timing is imperative. Working with a wealth advisor to review your options and draft a strategy can help you stay on schedule.

Transitions also give way to legacy planning. Your purpose, values and philanthropic goals all play a key role here. If you haven’t yet discussed these topics with an advisor, this could be a great time to start that conversation. You can also discuss some of your available tools, such as a trust or another charitable vehicle, and how to implement them.

Cash management

Rapidly increasing interest rates means that cash held in portfolios over the last two years has increased¹. Understanding the right amount of cash to hold in your portfolio is important but can be a challenge.

As we move forward in 2024, all signs indicate a decrease in interest rates, and as the bond market continues to strengthen, holding excess cash will have its own risks. If inflation plateaus, and rates hold steady longer than anticipated, identifying your cash strategy will allow for greater flexibility as the year progresses.

Taxes

There are two tax years remaining to leverage the benefits of the 2017 Tax Cuts and Jobs Act (TCJA), which expires at the end of 2025. Because it’s impossible to predict whether new legislation will extend the current limits, you may want to plan for the potential of higher taxes by making the most of the tax laws in place today.

Estate tax exemption

The 2024 estate tax exemption limit is $13.61 million. With portability, or the ability for a deceased spouse to extend their estate tax exemption to a surviving spouse, this effectively doubles to $27.22 million. The exemption limit extends to lifetime gifts and generation-skipping transfers (GSTs) as well. Beginning in January 2026, the limit is expected to revert to $7 million per person.

This means that families have the flexibility to transition a greater proportion of their wealth under current limits, which is a powerful tool. Family farms and ranches, privately held businesses, real estate holdings and investments are popular assets to transfer to exercise the current limits.

Federal income tax

Under the TCJA, income tax brackets were condensed, allowing for a reduction in federal income tax paid by many households. The current federal tax limits are the lowest in U.S. history. Tax planning discussions with your advisor should include strategies to optimize current rates.

For example, a married couple making $300,000 per year currently pays 24% federal income tax on earned income between $190,751 and $364,200 before the tax rate jumps to 32% at $364,201. To make the most of their situation, this couple can choose to complete a Roth IRA conversion for the difference ($64,200) and pay 24% income tax today while reinvesting the funds in the Roth IRA for long-term, untaxable growth.

From a financial and estate-planning perspective, an effective approach involves partnership and collaboration between you and your trusted advisors. This can include a wealth advisor, an estate planning attorney, a tax advisor, a private banker and an insurance agent. Working together, you should be well on your way to reviewing and refining your financial plan.