Financial Planning: 10 Opportunities for 2021

How can you optimize your financial plans for 2021? Financial experts think these 10 ideas have potential for success—if you get started soon.


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Have you set specific financial, investment, estate and philanthropic goals for 2021 and beyond? If not, these ideas can get you started. If so, fantastic—these 10 opportunities can enhance your plans.

1. Rebalance Your Portfolio

A volatile 2020 that favored specific industries over others, along with the potential buildup of cash at year-end from investments, means portfolios are likely in need of review. Now is a good time to compare current portfolio exposure to strategic targets and determine if changes are warranted. Be attentive not just to bond and stock mix, but also to underlying asset classes (for example, growth versus value).

2. Evaluate Your Cash Management Strategy

With yields close to zero (and likely to remain at that level for the foreseeable future), it’s important to maintain a prudent cash-management strategy. Evaluate balances relative to short- and intermediate-term needs to determine appropriate levels. Ensure cash balances respect FDIC/NCUA limits, and seek alternatives where warranted to provide protections.

3. Consider RMD/QCD Planning

Required minimum distributions (RMDs) are back after the CARES Act waived them last year. Evaluate the role RMDs will play in cash flow and tax planning. Consider the use of year-end RMD withholding as a replacement for quarterly estimates if RMD will be in excess of required tax payments. Remember that qualified charitable distributions (QCDs) remain a viable option for the charitably inclined to partially or fully offset RMDs. For those considering QCDs, it may be wise to wait for clarity on tax policy and the resulting impact on itemized deductions.

4. Review Insurance Policies

With record-low yields, dividend crediting rates on whole life policies may be negatively impacted. Without proper management, this trend could place certain policies at risk of lapse over time. Reviewing your policies now and developing a plan to protect your coverage allows time to make appropriate changes. It’s important to assess whether the current structure remains appropriate for your situation as well.

5. Develop Your Family Education Plan

Now is a great time to refocus on your family’s financial future. Developing a proper plan to bring the next generations into the fold isn’t only a good complement to sound financial planning, but actually critical to its execution. Developing the next generation to operate as sound stewards of your legacy is a high-impact activity that magnifies the benefits of prudent wealth planning.RELATEDReputation Management: Why Is It Important for Financial Services?

6. Use Low Rates to Your Advantage for Wealth Transfer

This environment is still extremely conducive for intrafamily wealth transfer. Utilizing notes between families or entities, selling assets to grantor trusts, or using grantor-retained annuity trusts (GRATs) all remain attractive strategies. For existing debt in place, consider refinancing given the current low interest rate environment.

7. Consider Freezing GRATs

After strong performance since the March 2020 lows, many GRATs hold significant appreciation. Consider the merits of locking in that appreciation via asset substitution with lower-risk, less volatile assets. New GRATs can be restarted to continue transferring upside if the markets cooperate, while the frozen GRATs can preserve value for intended beneficiaries.

8. Review Your Estate Plan

2020 highlighted the importance of planning for the unexpected, and that lesson extends to your estate plan. Review the key tenets of your plan and confirm that they still align with your wishes. This includes trustees, personal representatives, financial and health care powers of attorney, guardians, distribution provisions, among others.RELATEDWhy Financial Literacy Will Unite Americans

9. Don’t Forget the Estate Planning “Freebies”

While this remains a favorable environment for advanced wealth transfer strategies, keep in mind the simpler options. The annual exclusion gift limit remains at $15,000 per person. You have the ability to pay for medical expenses, with no limit, as long as you pay the medical provider directly. And you can still pay for education expenses, also with no limit, and again, as long as you issue payment to the institution, not the individual.

10. Plan for Philanthropic Giving

Donor-advised funds and family foundation balances have swelled in recent years, due to both accelerated gifting for tax purposes and market performance. This is a great time to take a step back and develop or confirm your strategic plan for the funds available for grants moving forward.

As with many financial topics, these planning concepts shouldn’t be viewed in a silo. Your advisory team can work with you to tie those pertinent to you to your broader plan. Feel free to contact your financial advisor to discuss further.

Jim Baird, David Stahl, Dawn Jinsky, Mike Lopus Published on February 16, 2021

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