The Three Item Tax Planning Checklist to Go Through with Clients Today

Michael Lynch   |  Mon Oct 26 15:30:00 EDT 2015

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With Halloween coming later this week and ushering us into November, I’m reminded that the end of 2015 will be here in the blink of an eye. This is the perfect time of year for financial advisors to do a year-end checkup with their clients, especially with regards to tax planning.

Of course, FAs and investors really should be thinking about taxes throughout the year, keeping an eye on tax diversification and making sure there is some money in taxable, tax deferred and tax-free accounts. That being said, now is a good time to bring up the subject of tax planning with your clients, so that they—and you—are prepared and have done all that can be done before the close of the 2015 tax year.

I suggest that FAs go through the following year-end tax checklist with their clients between now and the end of the year:

1. Perform a diagnostic inspection of your client’s portfolio.
Take a close look at how investments are performing, so that you can make any necessary changes before time runs out. Check to see if anything is underperforming, and if the time is right to sell out of a fund or stock. Compare the portfolio against your client’s long-term goals, to see if any of them would be better off without an investment or if an investment no longer fits their long-term needs. Also take a look at any losses—can your client take advantage of a prior or recent loss? Suggest to your clients a joint meeting with their tax professional as well. If you work with your client’s tax professional as a team, not only will you make sure you cover all the bases and take advantage of all tax opportunities, but you will also demonstrate to your clients that you have their best interests in mind.

2. Take inventory of all donations your client made throughout the year.
I’m sure you’ve told your clients to keep track of any donations and keep any receipts or proof of donation, but the reality is, we all tend to accumulate paperwork in a pile on the desk, lose it in the junk drawer or put it in a ‘safe’ place that we promptly forget. Before the close of the year, remind your clients to try to find any missing receipts from donations, or to track down proof of payment via online resources. Encourage them to file those documents in a dedicated folder, now and going forward.

In addition to rounding up all of their previous donations from the year, ask your clients about whether they plan to make a charitable contribution between now and the end of the year. Talk them through their options, highlighting both the pros and the cons of each method of giving, and making sure you cover with them the different amount of deductions each option affords. That way, you can help them make the charitable choice that also makes the most sense for their own financial plan.

3. Remind your client about their required minimum distribution, if applicable.
For clients who have reached and surpassed the age of 70 ½ , do not forget to have the RMD discussion. If they have an IRA or other retirement account, they must withdraw any RMDs from the accounts prior to the end of the year. If they fail to do so, there may be substantial financial penalties. There is still time now to go through each of your client’s accounts that might have an RMD, to review whether and exactly how much they are required to take out, and to make sure it is done properly and on time. Tie the RMD conversation into the charity conversation for an easy segue—if your clients are charitable and/or are looking to make a donation before year’s end, there may be an option to gift their RMD directly to a charity. The RMD conversation is another one to loop your client’s tax professional into, so that you can collaborate on what makes the most financial sense.

I’ll say again that tax planning should really be a constant, year-long process, but there is always room for another, final checkup. Make a point to go through this checklist with your clients in the fall of each year. Doing so will show them that you’re thinking about their taxes, even if they aren’t, and that you care about making sure they are getting the most out of every opportunity.

All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting or legal advice. As with all matters of an investment, tax, or legal nature, you and your clients should consult with a qualified tax or legal professional regarding your or your client’s specific legal or tax situation, as applicable.

The preceding is not intended to be a recommendation or advice. This material is intended for general use by financial advisors.

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Michael Lynch

Michael Lynch  

Vice President, Strategic Markets


Michael Lynch is Vice President of Strategic Markets for Hartford Funds. In his current role, Mike is responsible for engaging and educating both financial advisors and their clients about current and emerging opportunities in the financial-services marketplace. These opportunities range from tactical strategies in areas such as retirement-income planning, investment planning, and charitable planning, to anticipating and preparing for long-term demographic and lifestyle changes.

Mike joined the organization in 1993 as an annuity client service specialist. In 1997, he joined the Advanced Product Marketing department, where he developed an extensive knowledge of estate and retirement planning. In 2004, Mike became a regional sales director. In 2006, he became Vice President and national director of The Hartford’s Retirement and Wealth Consulting Group, which provided thought leadership and financial education focused on retirement and small-business planning. In 2012, he joined The Hartford Mutual Funds.

Mike earned his bachelor’s degree in business administration from Eastern Connecticut State University. Mike is a registered representative of Hartford Funds Distributors. He is FINRA Series 6, 63, and 26 registered and holds a life, health and variable insurance license. He currently lives in Charlotte, North Carolina, with his wife, Kim, and their children, Josh, and Em.


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