If you take a trip in the second half of April, you'll probably run into an accountant along the way. The weeks (and months) counting down to April 15 are so precious that many accountants defer personal trips and even weekend R&R until after they've sent back every last tax return and request for extension.
If only advisors were so lucky.
Planners are typically deluged with end-of-year activity, due in part to their own initiative with client portfolios and with client requests. But the past several weeks have been an extraordinary time. The looming fiscal cliff created distinct periods of urgency: first, moves that had to be finalized by the end of 2012, then a scramble to understand the unforeseen details of the fiscal cliff deal, which created substantial new options for planners and their clients. So much for easing into the new year.
For many advisors, especially those trying to lock in planning decisions under laws that were expected to change on Jan. 1, the frenetic pace at the end of the year was unprecedented. "Mad rush," was how Martin Shenkman, a New Jersey estate planner and Financial Planning contributing writer, described it, adding that it was "unlike anything I've seen in 30 years. Kinda like a Kmart blue light special for millionaires."
And the mad rush continues. The details of the fiscal cliff deal - as well as other new tax rules - have created an enormous opportunity for planners. In our cover story, 15 Tax Moves For Right Now (page 40), Financial Planning contributing writer Ilana Polyak highlights important changes advisors should consider as they review their clients' portfolios.
What should you focus on? For starters, consider a fresh look at deferred compensation, now that tax rates are fixed for the time being. Review your clients' gifting plans. And devote some time to understanding deduction phase-outs.
As Polyak details, taxpayers whose adjusted gross income exceeds upper limits will see many itemized deductions reduced - either by the lesser of 3% of AGI in excess of the threshold amount, or 80% of the itemized deduction otherwise allowable. One possible strategy? Try not to take all the itemized deductions at once. And if AGI can be reduced, there is more likelihood of preserving as much of the value of the deductions as possible. The problem for advisors, as Baird CFP Tim Steffen tells us, is that "people aren't always interested in reducing their income."
The story also has worthy updates on munis, gifting, college tuition planning, Roth accounts, trusts and more. Who knew the first quarter would be this busy?
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