It’s a good time to plan for—and with—your family.

Summer is here and you may have some extra time to get your personal financial house in order. To help U.S. taxpayers address some of the most pressing issues, here are six key action items that you and yours may want to consider during the coming months.

  • Long-term asset allocation
    Does your portfolio allocation support your goals? Is it built for your time horizon, appetite for risk and the current stage of the economic cycle? 
  • Yield harvesting 
    Are you relying too heavily on capital appreciation for investment returns? With valuations above long-term averages across asset classes, we are focused on securities that provide attractive cash flows.
  • Participation with protection
    Do you own assets that might provide a buffer against a rough patch for stocks? As the cycle continues to mature, we believe it’s prudent to add securities that could provide positive returns even if stocks decline in value.    

  • Retirement contributions
    Have you maximized your retirement plan contributions and reviewed your allocations within your retirement accounts? If you are 70 ½ or older: have you taken your required minimum distribution (RMD) amount for the year? 
  • Estimated payments
    Are your scheduled quarterly payments up to date? To check, ask your tax advisors to look at how much you’ve paid in the first two quarters and evaluate whether you should adjust upward or downward in the next two quarters.

  • Adjustable rate mortgages  
    Is the interest rate on your ARM resetting? Many of our clients have arms that are resetting in the next 12-24 months—which may result in a significant increase in the interest rate. Check to see if it makes sense for you to extend duration, given your particular goals and the low interest rates. 

  • Maximized deductions
    If you have an unencumbered property, have you considered taking out a mortgage and using the proceeds for investment purposes? Interest on loans used for investment purposes is fully deductible and helps offset the 3.8% Medicare surtax. Check with your tax advisors to see if this strategy might benefit you.     

  • Fiduciaries
    Have you named all the fiduciaries necessary to carry out your wishes? Are all the executors, trustees and (if you have children) guardians you need in place? Are they all still the right choices?

  • Annual exclusions
    To as many people as you like, you can give, tax-free, $15,000 this year ($30,000, if you’re a married couple). It’s best to make these gifts as soon as possible in the year, so that recipients can enjoy any appreciation in these assets.
  • Lifetime exclusions
    Have you taken advantage of your full lifetime exclusion amounts? Even if you’ve already used your full amount, you can still top off every year, as the lifetime exclusion amount is adjusted each year for inflation. Keep in mind that the sooner you make transfers to your heirs, the sooner appreciation on these assets will be out of your estate (and no longer subject to the estate tax).
  • Funding for education and healthcare 
     
    • Direct payments—Any tuition or medical expenses you pay directly to the provider are tax-free no matter who the beneficiary is. So speak with your advisors about whether it makes sense for you to pay out of pocket for your child’s (or other family member’s) education and healthcare. 
    • 529 plans—If you are using a 529 plan, an especially good tool for older grandparents, consider frontloading 5 years of annual gifts at once, which puts more money in earlier allowing any growth to be tax-free. Given that it’s already midyear, you may want to consider contributing for just one year now but then in January frontloading another five (if your plan permits.)  Be sure to consult your advisor to see if this option is viable and suitable for you.  

  • What to donate? Consider that it may better to give appreciated assets held for more than a year; so you may want to review which assets it’s best for you to donate. 
  • When? You may want to consider whether, given the new tax law, it makes sense for you to bundle several years of gifting into one year to ensure maximum tax deductibility. (Check with your accountant first.)
  • How? If you want the immediate deduction but are not sure yet who the charitable recipients should be, you may want to make that bundled contribution to a donor advised fund. 

However many of these items you get to this summer, be sure you involve your advisors—and family members—in these decisions. Your J.P. Morgan representative is available to help you and them with all your wealth planning needs.