Planning considerations for tax, liquidity, charitable, and estate planning strategies.
As you prepare for year-end planning, you may be wondering what steps to take today. While answers differ from family to family, here are a few steps to consider.
Host a meeting that includes your advisors
The fourth quarter can be a good time to bring your attorney, accountant, and financial advisors together to help align your situation and objectives. Below is a checklist of issues to consider discussing with your legal, tax, and financial advisors for this tax year and next. The sections that follow provide more context for your planning discussions.
- Is tax-loss harvesting recommended to offset gains realized during the year?
- Have you made your annual exclusion gifts?
- Are you making any “ed/med” gifts for education and medical payments (including contributions to 529 plans) that may meet the requirements for gift tax exclusion?
- Have you earmarked charitable gifting for the year?
- Have you reviewed beneficiary designations for retirement plan assets as well as any life insurance policies and annuities to make sure they reflect your current plans?
- What strategies may help minimize income taxes for each state that taxes your income?
- What is your plan for potential income and wealth transfer tax changes?
Please consider the investment objectives, risks, charges, and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.
Planning for recent tax changes
Changes to estate/gift exclusion amounts
With the passing of the One Big Beautiful Bill Act (OBBBA), beginning in 2026, the federal estate and gift tax exclusion increases to $15 million – up from $13.99 million – per individual and $30 million per married couple. The generation-skipping transfer (GST) tax exemption also rises to $15 million, indexed for inflation.
The tax change creates new opportunities to potentially reduce taxes, grow wealth, and pass assets to the next generation more efficiently, making now a good time to review potential gifting strategies with your advisors. Implementing a proactive, multi-year gifting plan could help reduce your eventual transfer tax exposure.
Reduction in top income tax rates made permanent
The top marginal income tax rate was permanently reduced from 39.6% to 37%, a change that affects high earners. Your tax advisors can help you review your options, such as whether it makes sense to do a Roth conversion of your Traditional IRA or even to accelerate rather than postpone recognition of income. A review of your financial situation might reveal tax savings opportunities.
Review liquidity, charitable, and estate planning strategies
In uncertain times, having access to sufficient liquidity can be critical when needs arise for quick access to cash. To enhance available liquidity, clients have asked about implementing a securities-based lending strategy, which may be preferable to selling securities if there’s a down market. Consult with your Wells Fargo Advisors financial advisor about potential options.
A review of cash return optimization strategies also might be in order. Those who have had recent liquidity events may not be in a rush to put that cash to work immediately, or they may have a large tax bill due next year. Talk to your advisors to determine potential strategies, such as short-term asset management, that may meet your investment objectives, risk tolerance, and liquidity needs.
This is also a good time to consider charitable planning strategies in light of recent tax changes. For taxpayers who itemize their deductions, especially those in the highest tax bracket, it might make sense to make larger charitable gifts in 2025 rather than 2026 because of limitations on charitable deductions beginning next year under the OBBBA.
Philanthropically inclined families can establish a private foundation or put money into a donor-advised fund. In either case, the year-end offers opportunities to make large transfers to these entities, which may be income tax deductible for the current year while distributions can be made to charities in future years.
Depending upon whether interest rates rise or fall, certain estate planning strategies may make more sense now than perhaps they did in past years. In addition to the charitable strategies mentioned above, talk to your advisors to learn about possible strategies that can be more or less advantageous when interest rates are higher or lower.
Share plans as a family
One way for families to share financial strategies and concerns is to have regular family meetings — and children returning home for the holidays can present an opportunity to conduct such meetings. Discussing plans for annual charitable contributions also gives a family the opportunity to reflect on their goals and values and define their legacy.
Wells Fargo Wealth & Investment Management (WIM) offers financial products and services through affiliates of Wells Fargo & Company.
Wells Fargo & Company and its affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.
Trust Services are available through Wells Fargo Bank, N.A. and Wells Fargo Delaware Trust Company, N.A. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.
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Donor Advised Fund donations are irrevocable charitable gifts. The sponsoring organizations maintaining the fund have ultimate control over how the assets in the fund accounts are invested and distributed. Donor Advised Funds donors do not receive investment returns. The amount ultimately available to the Donor to make grant recommendations may be more or less than the Donor contributions to the Donor Advised Fund. While annual giving is encouraged, the Donor Advised Fund should be viewed as a long-term philanthropic program. Tax benefits depend upon your individual circumstances. You should consult your Tax Advisor. While the operations of the Donor Advised Fund and Pooled Income Funds are regulated by the Internal Revenue Service, they are not guaranteed or insured by the United States or any of its agencies or instrumentalities. Contributions are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Donor Advised Funds are not registered under federal securities laws, pursuant to exemptions for charitable organizations.
