A Look Ahead

As we near the end of the year and head into the season of holiday gatherings and celebrations, it’s a good time to finalize planning opportunities for 2015 and begin thinking about opportunities for the New Year and beyond. While Madison does not provide tax or legal advice, we can help you plan ahead and implement strategies alongside your other key advisors. If any of the events on the following short list are on the horizon for you or your loved ones, consider developing an action plan before year end:

Aging Family Members

Many of us will be reconnecting with aging family and friends over the coming weeks. As you share stories of the events of the past year it provides an opportunity to check on their well-being and look for more subtle signs of aging. Such interactions may prompt future discussion of ways they might benefit from additional help. In the case of handling the delicate task of assisting someone entering a period of diminished capacity, early action is crucial. Early observations may help prevent health mishaps such as prescription confusion or falls due to coordination issues. And early planning can improve financial decision making while establishing a plan to meet longer term care needs. Beginning to consider what legal documents are required (i.e. Powers of Attorney) can avoid complications should cognitive impairment set in. There are many community and professional geriatric care resources available and familiarizing yourself with such resources can assist the planning for an elder’s care needs.

Review Health Insurance Coverage Changes2015 11 Healthcare costs - resized

It’s been widely publicized that premiums are likely to increase for most plans. In light of increasing costs it’s advisable to consider the many options available in today’s marketplace. For those nearing age 65, it’s critical to meet Medicare enrollment deadlines. And for those already receiving benefits, be aware of the Medicare open enrollment period that ends Dec. 7th. With Medicare plans changing, be sure to take a second look at the plan to understand your coverage. It’s important to note that prescription costs may vary widely across plans and pharmacy facilities so shopping around for the lowest price on regular prescriptions can really payoff. Another consideration is year-to-date spending versus your annual deductible. In a high spending year it may be wise to contact doctors now to schedule follow up appointments before year-end to maximize coinsurance paid by insurers. Similarly, if elective procedures are likely in the near future, consider timing of procedures to reduce your total healthcare costs.

Change in Employment Status

There are many situations that lead to a change in employment from year to year. Some of the more unpleasant triggers may be economic declines in the industry, layoff due to company reorganization, or internal restructuring. In our dynamic business environment it’s important to recognize such structural changes that may impact employee benefits or overall compensation level. Some things to consider include maximizing retirement plan contributions, pulling ahead medical treatments if insurance is changing, budgeting for education to build a new skill set, considering how changes in commuting costs may impact household cash flow, and whether potential layoff or early retirement may impact one’s financial situation or investment plan. 

Business Transitions2015 11 Business Transition

Similar to anticipating changes in your family’s employment status, business owners may face structural transitions in the coming year. There may be ownership changes or a key employee’s retirement on the horizon. Additionally, if you are a primary business owner oftentimes there are opportunities for year-end income and tax planning. It’s a good time to review your key man and other business-related insurances to confirm adequate coverage. Lastly, you may want to consider becoming involved with non-profit organizations either as a volunteer, in a leadership position, or make charitable contributions to an organization whose services and values align with your business goals.

Family Changes

Another more obvious area of potential change is in family structure such as additions of a child or grandchild or changes due to marriage or divorce. Sending a child off to college also results in additional planning needs both to position assets for financial aid and to target assets to fund college costs. Two important areas of consideration are annual gifting and funding of college savings plans.   Currently, Federal tax law allows individuals to give up to $14,000 per person, per year to as many individuals as you want, without triggering any gift tax. If you combine gifts with a spouse the amount doubles to $28,000 per individual recipient, per year. One helpful exception to these limits is the ability to make lump-sum contributions to an educational 529 Plan. Taxpayers can gift up to $70,000 and elect to spread the gift evenly over five years to completely avoid federal gift tax, provided no other gifts are made to the same beneficiary during the five-year period. That means a married couple may make a lump-sum college fund contribution of up to $140,000 without triggering federal gift tax. In addition, gifts can be an unlimited amount for qualified educational and medical expenses so long as the gift is paid directly to the educational institution or medical facility. Planning for impending marriage or divorce is also important due to the need to coordinate professional resources. Marital status changes usually impact several aspects of wealth including investment plans, cash flow, retirement, taxes, and estate plans.         

We hope as you reconnect with family and friends this holiday season that you’ll also consider making time to review potential wealth-enhancing events in the coming year. As always, your Madison team is ready to assist in making your personal hopes a reality during this season, and in the future.

Important Note: Please do not assume that any information contained in this Insight serves as the receipt of, or as a substitute for, personalized investment advice from Madison.  Madison does not provide tax advice – please consult with your tax advisor.