4th Quarter 2023 Tips, Estate Tax Predictions & Dumb Money!

Get your finances in order for the home stretch of 2023!
Neel shares tips for Taxes, Trusts, & learning from movies like Dumb Money.   Plus strategies to consider to gift, donate, and tax plan.

Popcorn-worthy Tax, Financial & Legal information!

September 26, 2023

Transcript

 Feel that little pressure there. If you're in the game, it's we're getting up on the fourth quarter. And the next time I speak to you, we're going to be in the fourth quarter of 2023. And man, that went fast, didn't it? I guess you need to say the same thing every year. So today, a special treat for you as you get into the fourth quarter, sometimes your strategy needs to be.

Sometimes you just need to be reminded of your strategy. So we've got a handful of tips that we're going to cover that would pertain to your taxes, a handful of tips that we need to think about when it comes to sort of like our wills trust and our state planning. And we're going to talk a little bit about dumb money, which is this movie that's come out there too.

So let's, let's talk about all of those for a second. Right? So, As we kind of come up on the fourth quarter, people start prognosticating, people start getting some, some ideas of what they think they might expect in 2024. Well, Bloomberg started doing this and Bloomberg actually made some predictions as to what they think are going to be some of these estate planning related numbers.

Some of you might know this is, you at this point are allowed to die in 2023 or give away during your lifetime. I'm not going to get into detail on this. 12. 9 million. This is a much longer conversation, but the amount gets updated for inflation annually. Now there is a sunset provision on this. So after 2025, these rules might change and, they might impact people who have more than a certain amount of wealth, disproportionately.

But Bloomberg, using the CPI index, has come up with some predictions as to what they think the 2024, and it's 13. 6 million. So actually, it's almost like a 750, 000 increase. Three quarters of a million dollar increase is, is great. If you need to do some estate planning and your wealth is at that level. Some of you have signed my, seen my video about my grandmother and how she used to give me a gift every year and how the IRS doesn't necessarily track those.

People get confused about this. It's like, well, I can give 12, 000 a year to anybody and I can write it off against my income tax, right? I can use it against my capital gains tax. No, it's basically a gift tax free transfer and that amount for 2024 Bloomberg is predicting is going to go up to nine, I'm sorry, 18, 000.

So just a second sort of a number to kind of tuck away for a little bit. And, this is an important one too, for those of us who have non. citizen spouses. I don't have a non citizen spouse. But for those who do have a non citizen spouse or may have a parent or a child who's who's married to a non citizen spouse or is a non citizen spouse, the rules are a little different for them, right?

So what what Bloomberg is expecting that the value of the gift that's not includable in the estate or that that limitation is going to be 185, 000. Really important, though, if you will have somebody in your life who has a non citizen spouse and they haven't done some specialized estate planning, this is an important point.

We need to make sure that you get that addressed. So there are some strategies we're going to continue to use. There are some newer strategies we're going to start exploring. So here's like a quick list if you're discussing, and of course, If you need somebody for that, we can certainly be those people for you as well, too.

Take advantage of some lifetime gifting. It may or may not be a good idea whether you gift directly to an institution, like an educational institution, whether you pay directly for somebody's healthcare expenses, or whether you give the money to them, or whether you give them stock they might be appreciating.

All of those have different tax ramifications, some positive, some negative. So you want to make sure you have that conversation. You want to look at things like that annual exclusion, that 18, 000 projection that might happen in 2024, but you don't want to do it haphazardly. You want to plan around this, and there's documentation sometimes that needs to be there too, especially when you have life insurance related gifting being done.

And grant or retain annuity trust, charitable lead trust, which I'm going to come back to in a second, and family limited partnerships, family LLCs, all things that should be considered. Any planning that you do should have some flexibility. So that's on our trust and estate side. Now, as we get into the fourth quarter, October 15th is right around the corner.

And that means that basically it's another tax filing deadline. Some of us who have businesses and corporations just basically catching a breath after the September 15th deadline. And boom, here we are. It's October 15th again, and you can't just rest after that. So a couple of things that you need to understand when it comes to this October 15th deadline.

One, it's one of the best times to start some of your financial planning, tax planning, or estate planning. Why? Well, you got your tax, taxes filed. Everything's nice and tight. You got your finger on the pulse of your finances, hopefully, including 1099s and K1s and where all your assets are. But now you're entering that fourth quarter.

So there's probably things that you can do. Or at least consider from a tax planning perspective. We do this for every one of our clients. Review your income and your deductions. Okay. Estimate what your income is going to be in 2023. And then C, is it going to be better for me to itemize? Is it going to be better for me to take the standard deduction?

Now, your advisor should be helping you with this. It may not be your accountant. It might be your financial advisor. If you had somebody who's taking a 360 view at it, even better. We might know somebody. So reach out to us if that's the case. With those of us who are still working, look at your retirement contributions.

Are we maxing them out? Should we be maxing them out? Do we need a bucket of pre tax and post tax money? Start looking at tax loss harvesting. Is there losses in my portfolio that I need to start considering to offset other gains that I might have? Or maybe start pocketing some of these. If you are involved with charities at all.

And if you are donating to charities at all, that could, and I'm going to argue should be a part of your planning because there are tax benefits associated with it and you want to make sure you're getting every possible benefit out there. Some of the stuff is not obvious and it's where the finances meet the trust, meet the tax planning part of it too.

So there's ways to leverage all that. And number five is check your withholdings right now. So again, this is not a comprehensive list, just five things that kind of came up to me this morning as I was thinking about what I wanted to share with you. Those income and deductions, maxing out those retirement contributions and reviewing those tax loss, harvesting charitable donations and your charitable intents and checking your withholdings.

If you have a paycheck that's coming there too, if things have changed. So five quick things to consider. And finally. I am not a huge Pete Davidson fan. In fact, I, this is gonna be horrible, right? So this is not safe for work. Do not watch these with kids. There are some really good financial movies out there and I think it's a great way to spark conversations.

Some better than others. Like I, Wolf of Wall Street was the one I was just going to talk about right now. It is definitely not, it is completely inappropriate. Very hard to watch. Uh, if you're, you know, if you've got a sensitive. Stomach for some of these things. Boiler Room is another one that comes to mind.

There's classics like Wall Street. So all good stuff. But, and I haven't even watched this movie yet, but this concept of dumb money. Seth Rogen is in there too. So Seth Rogen I can tolerate a little bit more than Pete Davidson. I don't know what it is. Pete Davidson has, I'm not a violent person, but I think some folks have said he's got a very punchable face.

I don't know why he's so famous and I don't think he's a great actor, but sorry, Pete Davidson. I'm sure you're a really nice guy. Just not my, not for me. But what is dumb money about? It's about how some stocks like GameStop basically became super popular and their prices went way up. Now, some of us know about this meme stock phenomenon, but bear with me for a second.

I have these quick, like five or six thoughts that I took based on what I've read about dumb money. I will probably watch it because I'm a sucker for watching stock and money related movies. Kind of weird. You know, it's like, it's like a doctor who comes home and watches ER, I guess, or lawyers who watch suits.

I don't watch suits. So a couple of things, it's rare for a movie to focus on stock prices, but stock prices basically just show what people are willing to pay for a piece of a company, right? So every day, tons of money's being spent buying and selling stocks with prices changed. So why do some stocks become more popular?

We're kind of like this GameStop AMC sort of phenomenon, just like colors of cars might become more popular. Sometimes stocks become trendy or cool. And that's what happened with meme stocks in 2021. A lot of people were sitting at home COVID. And, and honestly, I can't even explain it. I don't think many professionals can really explain it.

It's one of these things where influencers and social media and, and the news becomes sort of a self fulfilling cycle. So that happened now over years. Many experts, if you will, or people who actually watch have noticed that there's patterns in stock prices, but obviously it's not about why one stock is popular.

It's just more about which stocks might grow over time. That should be a sound. investing policy. But people will try to guess what that next big thing is. And I think that's what happened with dumb money. It's tempting. You know, we all want to, we all, we all like winning, right? So it's tempting, but that is a little bit of gambling when it comes to the GameStop phenomenon.

So doing that is risky and you might get lucky once, but it doesn't mean you're going to get lucky over and over again. Because, you need to not only know when to get in, but you also need to know when to get. So, there's all these meme stock risks, and if anybody wants to talk about meme stocks, you can certainly speak with me.

You gotta learn from the past, right? Because just because a stock did well before, doesn't mean it's gonna do well in the future as well. I just think that the movie's gonna be entertaining. I'm just a little worried, because if a lot of people go out there and watch that movie, or any movie that sort of like glorifies some of this stuff.

And I'm not saying it does, but if they do, people might think they are outsmarting stuff or they might hop on this a little too late and it might just be really something that's popular for the sake of being popular. So go out there, enjoy the movie, have some of that popcorn. I've had popcorn for dinner before, so I strongly encourage it.

I, this is not my, health tip. It's just, Oh, by the way, I should say this. This is not legal advice, tax advice, financial advice. It's definitely not health advice when I just told you to eat popcorn for dinner. But enjoy the movie and if anybody's seen it out there, let me know how it is. I'm looking forward to seeing you at the beginning of the fourth quarter.

Huge news, for those of you who don't already know coming out there for the end of 2023 for us. And those of you who don't know, we have moved offices. So hit me up if you need that address too. Neel Shah with Shah Total Planning here for Shah Plan-it. I will see you next week. Bye everybody.