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  • Writer's pictureRosie Brady

End of Year Planning 2021


The end of the year has so many joyous moments. The holidays, time away from our ordinary schedule to visit family and friends, and the winter solstice marking a shift toward the longer days of summer. This time also gives us a chance to reflect on the past year, and to think about our goals for the New Year. Perhaps estate planning is the item you have been meaning to check off that to-do list.

As we scramble to obtain gifts for our loved ones, recall that one of the most meaningful gifts you will provide to your family is your estate plan. We are on this planet for a short time, but the legacy we leave behind lasts forever.

In addition to ensuring you have an up-to-date estate plane, here are some more more practical tips for the end of the year.

Annual gifting. The IRS requires you to report a gift you make to someone, other than your US Citizen spouse, if the value of the gift is greater than $15,000 per year in 2021, or $16,000 per year in 2022. This is commonly referred to as the birthday gift or Christmas gift exception. If you have not already taken advantage of this opportunity in 2021 and you are seeking to minimize your exposure to the estate and gift tax amount, then now is the time to take advantage of the estate and gift tax annual exclusion amount.

If you write a check, the recipient must deposit the check in 2021. Also, it must clear in the ordinary course of business (which can happen in January). A holiday gift which is a check that doesn’t get deposited until after New Year’s Day is considered a gift in 2022. A cashier’s check can avoid this, since a gift of a cashier’s check, like cash, is complete upon delivery. If you mail a properly endorsed stock certificate to a family member, the gift is not completed until received.

Charitable deductions. Generosity is not only a fantastic way to minimize your exposure to income, gift, and estate tax, but you can see the benefits of your gift directly help the charity of your choice. The CARES Act offered a unique tax benefit to encourage charitable giving. For the 2020 tax year, the CARES Act provided that taxpayers who itemize deductions may elect to deduct cash contributions made to certain qualifying charities (not including donor advised funds), in an amount of up to 100% of their adjusted gross income for tax year 2020. The “Taxpayer Certainty and Disaster Tax Relief Act of 2020” extended this provision through tax year 2021 only.

Reviewing your plan. In 2022, the federal estate and gift tax exemption will increase to $12,060,000 per person. Many plans created before 2010 include a mandatory bypass trust (also known as a family trust or a credit shelter trust) to utilize a deceased spouse's exemption. Now, these trusts are most often unnecessary, burdensome, and cause negative tax implications for surviving spouses and other beneficiaries. Reviewing a plan to update and remove these often unnecessary provisions can save yourself, your spouse, and your beneficiaries a huge headache later on. The review process is also a great time to ensure all assets are properly titled in the name of your trust.

We look forward to assisting you with your estate planning goals in 2022!

Happy new year!

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