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2021 Beginning of the YearFinancial Planning Checklist
Greetings!While the past twelve months certainly brought challenges, the year didcome with some benefits - The Coronavirus Aid, Relief, and EconomicSecurity Act (CARES) allowed individuals to skip Required MinimumDistributions (RMDs) in 2020, the 10% penalty for taking early distributionsfrom retirement plans was waived, tax deadlines were extended and directeconomic relief was provided to many businesses and individuals.In late December, President Trump signed additional relief into law with theCOVID-Related Tax Relief Act (COVIDTRA). The new bill provides furthereconomic relief to businesses and individuals, funding for schools andvaccine distribution, and extends several tax breaks. Additional suspensionKathryn A. O'HaraDirector of Financial Planningof RMDs was not included in the bill. While more legislation could bepassed later this year, currently individuals who are 72 years and older in2021 will need to take a distribution by year end or face a penalty.This year promises to usher in change with President Joe Biden havingtaken office. His administration has expressed interest in tax policychanges, including increasing tax rates for wealthy individuals and largecorporations and reducing the Lifetime Federal Estate and Gift TaxExemption (currently 11,700,000 per person). While it remains to be seenwhich proposed tax policies will become law, we are currently discussingwith our clients the potential impact of these changes.To kick off your 2021 planning, we’ve summarized a list of important actionitems to consider. As you navigate the 2021 Beginning of the YearFinancial Planning Checklist, please keep in mind the following: This list is meant to serve as a reminder of suggested actions toconsider. Since personal circumstances vary, it is important to consultwith your Altair engagement team and personal tax advisers regardingyour specific situation. We’ve provided a glossary beginning on page 6 that provides abrief explanation of each task listed. If you have questions that gobeyond the information provided, please don’t hesitate to reach out toyour Altair engagement team.303 W. Madison Street, Suite 600Chicago, IL 60606312.429.3000altairadvisers.com
2021 Beginning-of-Year Financial Planning ChecklistCompletedRecommendationResponsible PartyTarget DateLegislation Updates Review COVID-Related Tax Relief ActAltair to Advise1st Quarter Resume Required Minimum DistributionsAltair to AdviseDecember 31st, 2021Retirement Planning / Employee Benefits Review 2020 Spending and SavingsClient/Altair1st Quarter Discuss 2021 Expense and Cash Flow GoalsClient/Altair1st Quarter Communicate Income Adjustments andNew Stock Grants for Upcoming YearClient1st Quarter Review Asset Withdrawal Strategy andAdjust if NeededAltair to Advise1st Quarter Maximize Retirement Plan Contributions(Pre-Tax/Post-Tax/Catch-Up Contributions)Client1st Quarter Increase Health Savings Account and FlexibleSpending Account Contributions for New LimitsClient1st Quarter Fund 2020/2021 Non-Deductible IRAs &Consider Converting to RothAltair to AdviseApril 15th, 2021Gifting / Education Planning Discuss Gifting Plan for Children/GrandchildrenClient1st Quarter Fund 2020 Roth IRAs for ChildrenClientApril 15th, 2021(2021 Annual Exclusion Gifts 15,000/ 30,000)(If they have earned income)Estate Planning Discuss Potential Changes to Estate Tax Lawswith Altair and Estate AttorneyAltair / AttorneyOngoing Review Estate Plan andFiduciary/Beneficiary DesignationsClientOngoing Fund Irrevocable Life Insurance Trust (ILIT)AccountsTrustee1st QuarterIncome Tax Planning Gather and Organize Documents Necessaryfor Tax FilingCPA/Client/Altair1st Quarter Adjust Tax WithholdingClient1st Quarter3
2021 Beginning-of-Year Financial Planning ChecklistIncome Tax Planning Cont’d Consider Roth IRA ConversionAltair/ClientOngoing Consider Making a Qualified CharitableDistribution (QCD) from your IRAAltair/ClientDecember 31st, 2021Risk Management / Other Review Group Benefit Elections andUnderstand Updates for Coming YearClientOngoing Review Health Insurance Plan andUnderstand Updates for Coming YearClientOngoing Assess Life Insurance CoverageClient/AltairOngoing Review Property & Casualty CoverageClient/AltairOngoing Evaluate Current Debt Structure andCurrent Interest RatesAltair to AdviseOngoingImportant Milestones Age 50You can make catch-up contributions to IRAs and some qualifiedretirement plans Age 55You can take distributions from your 401(k) plan without penalty ifretired Age 59 ½You can take distributions from IRAs without penalty Age 62-70You can apply for Social Security Benefits Age 65You can apply for Medicare Age 72You must begin taking Required Minimum Distributions from IRAsKey Upcoming Dates 3/15/2021Last day to use 2020 FSA dollars (grace period expires) 3/15/2021Deadline for Partnerships/S Corporations to file tax returnor file extension 4/15/2021Deadline to file 2020 individual income tax return or file extension deadline to file Form 1041 – Trusts and Estates 4/15/20211st Quarter 2021 Estimated Tax Payment Due4
2021of Year f-YearFinancialPlanningChecklistFederal Estate Tax & Gift Tax20212020 11,700,000 11,580,000Top Marginal rate is 40%Top Marginal rate is 40% 15k per person 15k per person20212020Individual IRA (Roth, Traditional) 6,000 6,000Catch-Up Contribution (Age 50 ) 1,000 1,00020212020 290,000 285,000 19,500 19,500Combined Federal and Gift Estate Tax ExclusionFederal Estate Tax RateAnnual Gift ExclusionIndividual Retirement AccountsAnnual Qualified Plan LimitsMaximum Compensation Used to Determine ContributionsDeferral Limits for Plans401k & 403bCatch-Up Contribution (Age 50 )SIMPLECatch-Up Contribution (Age 50 )457 6,500 6,500 13,500 13,500 3,000 3,000 19,500 19,500 6,500 6,500SEP IRA 58,000 57,000Maximum Annual Addition for Defined Contribution Plan 58,000 57,000Maximum Annual Benefit for Defined Benefit Plan 230,000 230,00020212020Maximum Individual Income Tax Rate37%37%Maximum Rate for Qualified Capital Gains & Dividends20%20%Standard Deduction - MFJ 25,100 24,800Standard Deduction - Single/MFS 12,550 12,400Standard Deduction - Head of Household 18,800 18,650 0 020212020Health Care FSA Contributions (pre-tax limit) 2,750 2,750Dependent Care FSA Contributions (pre-tax limit) HSA 5,000 5,000 3,600/ 7,200 3,550/ 7,100 1,000 1,000Catch-Up Contribution (Age 50 )Federal Tax RatesPersonal ExemptionOtherContributions (self/family)Catch-Up Contribution (Age 55 )HDHP Minimum Deductibles (self/family) 1,400/ 2,800 1,400/ 2,800HDHP Maximum Out-of-Pocket Amounts (self/family) 7,000/ 14,000 6,900/ 13,800This information provided is not written or intended as specific tax or legal advice. Altair employees are not authorized to give tax advice orlegal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planningprocess should work with an estate planning team, including their own personal legal or tax counsel.5
2021 Beginning of Year Financial Planning Checklist - GlossaryLegislation Updates1. Review COVID-Related Tax Relief Act: The 900 billion relief bill and 1.4 trillion governmentfunding package signed into law late last year extends pandemic aid to Americans. Highlights of thebill include direct stimulus payments, extended and enhanced unemployment benefits, a secondround of small business loans, and funding for schools, childcare, and vaccine distribution. The reliefpackage also extends the AGI limit increase for cash charitable contributions. Individuals can fullydeduct cash gifts up to 100% of AGI in 2021. This does not apply to contributions to Donor AdvisedFunds (DAFs) or private foundations. The relief package also clarifies that businesses can deductexpenses paid with forgiven PPP loans. The clarification applies to old loans and to new loans withno limitations. Additionally, a number of tax provisions were extended including the 7.5% medicalexpense deduction, the expansion of the lifetime learning credit and the deductibility of mortgageinsurance premiums (PMI). Additional legislation could be in store later this year.2. Resume Required Minimum Distributions: The recently passed COVID relief legislation did notextend the suspension of Required Minimum Distributions (RMDs) into 2021. Currently, individualswho are 72 or older in 2021 will need to take their distribution prior to year end or face a penalty. Thebalance of your accounts on December 31st, 2020 will be used to determine your 2021 RMD. TheSECURE Act passed in 2019 increased the age for RMDs from 70½ to 72 if you were born on orafter July 1st, 1949.Retirement Planning / Employee Benefits3. Review 2020 Spending and Savings: Examine year-end banking and credit card statements andcompare actual expenses vs. projected expenses. Confirm whether you met 2020 savings goalsand determine if you have excess savings to invest.4. Discuss 2021 Expense & Cash Flow Goals: Do any adjustments need to be made to expenses?What are your goals for the upcoming year? Are there any big expenses on the horizon?5. Communicate Income Adjustments and New Stock Grants for Upcoming Year: Inform yourengagement team about any adjustments to compensation (salary/bonus) and new stock grants inthe coming year.6. Review Asset Withdrawal Strategy and Adjust if Needed: Once you determine how muchmoney you will need to withdraw from your portfolio in 2021, your Altair team will help you determinewhich assets to draw on first.7. Maximize Retirement Plan Contributions: In 2021, you can elect to defer up to 19,500 of yourcompensation to a 401(k). Those aged 50-plus can defer an extra 6,500 for a total of 26,000. Additionally, some plans allow you to make after tax contributions, up to the IRS limit of 58,000.6
2021 Beginning of Year Financial Planning Checklist - Glossary8. Increase Health Savings Account/Flexible Spending Account Contributions: In 2021, you cancontribute up to 2,750 to a health care FSA and 5,000 to a dependent care FSA. Additionally, theIRS increased HSA contribution limits to 7,200 for those with family coverage and 3,600 forindividuals. Individuals aged 55 and older can contribute an additional 1,000.9. Fund 2020/2021 Non-Deductible IRAs & Consider Converting to Roth: Although your incomemay be too high to make a direct contribution to a Roth IRA, you can fund a Roth IRA by making anon-deductible IRA contribution and immediately converting it to a Roth IRA. In 2020 and 2021,individuals can contribute 6,000 to an IRA. Those aged 50-plus can defer an extra 1,000 for a totalof 7,000. With the passage of The SECURE ACT, there is no longer an age limit for contributions.Gifting / Education Planning10. Discuss Gifting Plan for Children/Grandchildren: If you plan on giving money to your children orgrandchildren this year, consider how you plan to make the gifts (529 contributions, cash gifts, etc.)In 2021, the annual exclusion for gifts to any individual is 15,000 ( 30,000 per couple). As areminder, if you pay college or medical bills directly to the institution, your payment is not considereda gift and there is no limitation on those contributions.11. Fund 2020 Roth IRAs for Children: If your children have earned income, you can use part of theirannual gifting exclusion to fund a Roth IRA for each working child. This strategy helps transfer wealthto the next generation in a tax-efficient manner.Estate Planning12. Discuss Potential Changes to Estate Tax Laws: In 2021, the lifetime Federal Estate and Gift TaxExemption was increased to 11,700,000 ( 23,400,000 for married couples). The current exemptionis set to sunset in 2025 and revert back to the pre-2018 exemption level of 5,000,000 ( 10,000,000 for married couples), and Congress could change the exemption sooner.Now is a good time to discuss with your Altair team, estate attorney and tax advisers the impact thiscould have on your individual situation and whether any action needs to be taken.13. Review Estate Plan & Fiduciary/Beneficiary Designations: With the passage of The SECUREAct, it is crucial to review your estate documents and beneficiary designations with your attorney toensure they still meet your wishes. Most non-spouse beneficiaries will now be required to take largerdistributions to adhere to the new 10-year rule (the stretch provision was eliminated for certain IRAbeneficiaries), which could result in a higher marginal tax rate as compared to a longer distributionperiod.14. Fund Irrevocable Life Insurance Trust Accounts: Make gifts to your Irrevocable Life InsuranceTrusts (ILITs) to ensure assets are in place when insurance premiums are due.7
2021 Beginning of Year Financial Planning Checklist - GlossaryIncome Tax Planning15. Gather and Organize Documents Necessary for Tax Filing: Begin collecting W-2s, 1099s,investment income information (interest & dividend income, proceeds from the sale of stocks andbonds, income from foreign investments), business income and Social Security benefits to prepareyour 2020 federal and state tax returns.16. Adjust Tax Withholding: To make sure you don’t wind up with a large tax bill or a significant refundwhen you file your 2021 tax return, take some time to review your W-4 and update your withholdingif necessary. In 2020, the Internal Revenue Service re-designed the W-4 form to make withholdingsmore accurate.17. Consider Roth IRA Conversion: Anyone, regardless of income, is eligible to convert a traditionalIRA to a Roth IRA. The Roth IRA can provide significant income tax advantages for both you andyour beneficiaries. Please consult with your accountant to discuss potential taxes that could be owedon a Roth conversion, and consult Altair to determine whether a Roth conversion makes sense foryou.18. Consider Making a Qualified Charitable Distribution (QCD) from your IRA: Charitably inclinedindividuals over 70½ can consider a Qualified Charitable Distribution (QCD) from their IRA. A QCD isa non-taxable distribution from your IRA directly to a qualified charity that counts towards your RMD.When making a QCD election, the amount you distribute will not be included in your adjusted grossincome. The total of all QCDs is limited to 100,000 and you cannot make the distribution from SEPand SIMPLE plans if an employer contribution is made for that year. A QCD cannot be made to aDonor Advised Fund.Risk Management / Other19. Review Group Benefit Elections & Understand Updates for the Coming Year: Review youremployee benefit elections (group health, dental, life, disability, FSA, HSA) and ensure youunderstand any updates to coverage.20. Review Health Insurance Plan & Understand Updates for the Coming Year: Familiarize yourselfwith updates to your medical coverage including new co-insurance and deductible limits.21. Assess Life Insurance Coverage: The new year is an opportune time to review your life insuranceand make sure you are properly covered. In addition to providing coverage in the event of apremature death, life insurance can also be used to help cover future estate tax liabilities, secureprotection on business owners or key employees and ensure a future inheritance for your children.Individuals who no longer have a need for coverage should discuss with their engagement teamwhether it makes sense to continue funding policies and if the option to restructure exists.22. Review Property & Casualty Coverage: If any significant improvements were made to your homeor you sold or purchased a property in 2020, it is important to review your coverage and confirm youare properly insured. Additionally, you should review your current excess liability coverage andinventory your special, valuable property items. The agreed-upon values listed in your policyrepresent the cash settlement in the event of a covered loss.8
2021 Beginning of Year Financial Planning Checklist - Glossary23. Evaluate Current Debt Structure & Current Interest Rates: With interest rates at near-recordlows, it is important to analyze your outstanding debt and determine whether or not it makessense to restructure any outstanding loans.This information provided is not written or intended as specific tax or legal advice. Altair employees arenot authorized to give tax advice or legal advice. Individuals are encouraged to seek advice from theirown tax or legal counsel. Individuals involved in the estate planning process should work with an estateplanning team, including their own personal legal or tax counsel.9
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Financial Planning Checklist, please keep in mind the following: This list is meant to serve as a reminder of suggested actions to consider. Since personal circumstances vary, it is important to consult with your A
