Planning
Financial checklist for the end of 2024
November 2024
Practical tips for a better 2025
We have prepared this article focused on U.S. tax residents, as a service to our clients and readers. Its objective is to provide general information and does not constitute specific advice or recommendations individually , including legal or financial recommendations.
One of the most talked-about anecdotes in the financial world is that of Warren Buffett, the legendary investor and billionaire, who surprised people by revealing that his effective tax rate was lower than his secretary’s. This is because a large portion of his income comes from capital gains and dividends, which can be taxed at a lower rate than wage income.
Buffett is an example of how to use tax strategies intelligently. Among other things, he has probably taken advantage of tools such as charitable donations of appreciated assets to optimize his tax burden, in addition to carefully planning when and how to report income. These practices, all within the legal framework, highlight how small strategic decisions can have a big impact on your finances.
The lesson? Strategies like tax-loss harvesting, retirement account contributions, planned gifts, and charitable donations are effective ways to legitimately reduce your tax burden. And while you don’t need to be a billionaire like Buffett, anyone can benefit from well-executed tax planning.
In our latest blog, Elecciones y Mercados: Parte II , we explore how political proposals can impact markets. Now that we’re approaching year-end, it’s the ideal time to review your tax and wealth strategy, making sure you’re prepared to start 2025 with a solid, well-planned foundation.
Below, we share a list of key actions you can consider to protect and maximize your wealth (always in consultation with legal and accounting professionals). For practical purposes, this is only a summary. If you’re interested in discussing any of these strategies in greater detail, we invite you to contact us.
1. Evaluate your capital gains and losses
What is tax-loss harvesting?: When selling an investment that has a value higher than its purchase price, you usually have to pay a tax on realized gains (this is not the case if you have an investment with a gain that you haven’t sold). The tax-loss harvesting is a strategy that involves selling assets at a loss to offset realized capital gains, which reduces your overall tax burden. These losses can also be applied to offset up to $3,000 of ordinary income annually and, if there are excess losses, the unused balance can be carried forward to future years.
Key action: Review your portfolio to identify opportunities for tax-loss harvesting and consult with your advisor to carry it out correctly.
Additional information at Schwab
2. Maximize your contributions to retirement accounts
How do retirement accounts work?: These accounts, such as a 401(k), IRA, or Roth IRA, allow you to save for the future while enjoying tax benefits. For example, contributions to a 401(k) reduce your taxable income, and earnings in a Roth IRA grow tax-free.
Key action: Make sure you’re contributing the maximum allowed and consider converting your traditional plan to a Roth if circumstances allow.
Table with contribution limits for 2024
3. Review your giving strategies
What is a Donor-Advised Fund? : It’s a specialized account that allows you to donate money or appreciated assets, receive an immediate tax deduction, and distribute those funds to qualified charities over time. This maximizes tax efficiency and makes it easier to manage your donations.
Key action: Consider setting up a Donor-Advised Fund to support important causes while optimizing your taxes.
4. Optimize your estate planning
What is estate planning? : It is the process of organizing how your wealth will be transferred to heirs or beneficiaries, aiming to minimize taxes and ensure your wishes are respected. It includes documents such as wills, trusts, and powers of attorney.
Key action: Review and/or update your will or trusts, and review the beneficiaries of your financial accounts to reflect changes in your personal or family situation.
Checklist
5. Consider strategies for gifts above the “gift and estate tax exemption”
What is the Gift and Estate Tax Exemption?: It is the total value limit that a person can transfer through lifetime gifts or at death, without them being subject to federal gift or estate taxes in the United States. For 2024, the gift and estate limit is $13.61 million per person (or $27.22 million for married couples). More information at the link
Key action: Individuals are authorized to make gifts of 36,000 per couple) to as many individuals as they deem appropriate. This is a way to reduce the tax burden over the long term for high-net-worth individuals and families who are above the limit and could be subject to estate and gift tax. Additionally, education and medical expenses paid for the benefit of another person are also excluded from the limit.
6. Maximize tax protection through insurance
Consider using insurance policies as a tool for estate taxes: For families with significant wealth, the death benefit from a life insurance policy can be used to cover inheritance taxes, ensuring that heirs receive the full estate without needing to liquidate assets.
Key action: Review your current policies and consider adjusting coverage or purchasing new policies as part of your overall strategy.
7. Plan your liquidity
What is liquidity?: It’s the ability to access cash or easily convertible assets to cover immediate needs. This includes year-end taxes, emergency funds, or commitments like capital calls in private investments.
Key action: Review your cash flow projection, adjust your portfolio if necessary, and make sure you have enough liquidity to meet your goals and obligations.
8. Consider education planning with 529-type accounts
What is a 529 plan? : It’s a dedicated savings account to cover education costs, such as college tuition or K-12 programs in certain states. Contributions grow tax-free, and withdrawals are tax-free if certain requirements are met and they’re used for qualified education expenses.
Key action : Consider opening or contributing to a 529 plan (or another education plan) for your children or grandchildren. This can help you save strategically while reducing your estate’s tax burden.
More information in the link
Conclusion
Year-end is a key time to reflect on your financial situation and take strategic steps that protect and grow your wealth. Remember that every situation is unique, and what works for some may not be ideal for others. At Evolution Wealth Advisors, we are here to help you tailor your financial plan, together with your legal and accounting advisors, so that it fits your specific needs. We invite you to contact us and explore together how to implement these strategies to optimize your financial results.
Disclaimers / Legal Notice:
EVOLUTION WEALTH ADVISORS LLC has prepared the Content. as a service to EVOLUTION WEALTH ADVISORS LLC. readers. It is provided only for general information and its not intended to address your particular requirements or to constitute any form of advice or recommendation (including, but not limited to legal advice). EVOLUTION WEALTH ADVISORS LLC. has used reasonable efforts in collecting, preparing and providing quality information and material, but does not warrant or guarantee the accuracy, completeness, adequacy or currency of the information contained in the Content. Users of information on any EVOLUTION WEALTH ADVISORS LLC. letters do so at their own risk and acknowledge that this information should not be relied upon in making (or refraining from making) any specific investment or other business or personal decisions (professional advice should always be obtained prior to making any such decision).In no way shall EVOLUTION WEALTH ADVISORS LLC. be liable to you for any claims relating in any way to your inability or failure to perform any kind of research or related work or to perform such research or related work properly or completely, even if assisted by EVOLUTION WEALTH ADVISORS LLC., your use of the Content or your reliance on the information contained in the Content.
Evolution Wealth Advisors LLC has prepared this presentation as a service to its clients and readers. This presentation provides general information and does not constitute any form of advice or recommendation (including, but not limited to, legal advice). Evolution Wealth Advisors LLC has made reasonable efforts to collect, prepare, and provide quality information and material, but does not guarantee the accuracy, completeness, or timeliness of the information contained in this letter. Users of any material sent by Evolution Wealth Advisors LLC do so at their own risk and acknowledge that this information should not be relied upon when making (or refraining from making) any specific investment or other business or personal decisions (professional advice should always be obtained before making such a decision). Under no circumstances shall EVOLUTION WEALTH ADVISORS LLC. be responsible for any claim related in any way to your inability or failure to conduct research or to conduct such research inadequately or incompletely, even if assisted by EVOLUTION WEALTH ADVISORS LLC