Start now: Your timeline for year-end wealth planning

When it comes to year-end tax, estate, financial and philanthropic planning, it is never too early to think about what you want to accomplish.

In fact, early fall is the perfect time to line up your financial tasks for the rest of the year, including those you’ll need to complete before the clock strikes midnight on New Year’s Eve.

Below is a summary of the top transactions on our list and our recommended timeframe for each.

IRA Distributions

If you are over 72 (or 73 if you turned 72 this calendar year), conventional wisdom is to delay taking your required minimum distributions from your IRAs until the end of the year. The idea is, by delaying, you allow the assets to appreciate tax-free within the IRA.

This generally is a sound practice. While markets fluctuate and some years end lower, the value of the stock market has historically been higher at the end of the calendar year than at the beginning of the year in most years.

Those aren’t bad odds to support taking your distributions in December rather than June. But once you hit early December, our recommendation is to make your withdrawals.

Distributions typically are made by a wire transfer of cash. Those generally can be made on the same day, but it is best to give yourself a few business days, especially if you are pushing toward the end of December.

If doing a Qualified Charitable Distribution (QCD), you’ll want to give yourself at least a week to obtain the receiving organization’s transfer information and complete the transfer, particularly if it is a first-time distribution to an organization.

If you are taking distributions in-kind, start the process as soon as possible to make sure you have the logistics lined up. Give yourself a week if you are withdrawing shares in a publicly traded company. For shares in a mutual fund, give yourself two. If you are dealing with private assets, begin the process well before December to work out all the necessary transfer documents and tax concerns.

Outright Gifts to Individuals

Making outright gifts to individuals can seem straightforward. But it can cause you a tax headache if you don’t know the rules.

In general, your beneficiary needs to have control of an asset for a gift to be complete.

For gifts of cash or checks, the money should be settled in your beneficiary’s account by December 31.

Handing a check to a child on New Year’s Eve doesn’t cut it, since in theory you could still cancel the check.

Given that even the most responsible beneficiary may lose track of depositing a check, the best practice for cash gifts is to wire the funds. Or if you want to give someone a check, give it to them at the beginning of December (or better yet Thanksgiving), then monitor to make sure the check is cashed.

For gifts other than cash, again, give yourself as much time as possible. Consider December 1 your deadline. While publicly traded stock and mutual funds generally don’t need a month to transfer, you don’t want to delay or lose track of initiating the transfer and suddenly be in a tight timeline. This is especially true if your beneficiary will be opening a new account to receive your gifts. Depending on the regulatory requirements of the institution, opening a new account can take several days to weeks.

For other assets, like real property, artwork or interests in a private business, you will likely need an attorney to prepare the necessary documents. Know you’ll also generally need to obtain a professional appraisal to establish the value of your gift for tax purposes. The appraisal can be done after the fact, but it’s best to know the value before you make a transfer. Documents and appraisals take time, so call your attorney and an appraiser as soon as you know you plan to make a gift, or no later than the beginning of November if that is part of your plan.

Remember, unlike IRA distributions, it is better to make gifts to individuals earlier in the year. The longer a beneficiary has a gift, the more benefit they receive. If you find yourself rushing in December to execute your regular gifts, consider shifting to January when there’s no pressure on timing.

Gifts to Charity

The rules for gifts to charity are a little more relaxed.

Funds generally don’t need to settle in the charity’s account for the gift to count. Mailing a check or initiating an electronic transfer can be sufficient. But you want to make sure you postmark your gift by year-end if the timing is significant.

Many people gift appreciated securities to charity at year-end. That makes for good tax planning, since you generally can deduct the market value of the securities while the charity can sell them without any capital gains taxes to you or the charity. But logistically, make sure the charity is set up to receive your securities.

If gifting securities or property other than cash, start the discussion with the charity today, or at minimum in November, not December. Especially with smaller charities, it may take them time to execute your gift appropriately.

Also, consider a Donor Advised Fund if the year-end timing of your charitable gifts is a regular concern for you. With a Donor Advised Fund, you can make one gift to the Fund by year-end, then advise on distributions to the other charities at your own pace. Setting up a new Donor Advised Fund, though, takes time. You’ll want to start that process early in December at the latest.

Gifts in Trust

Gifts in trust are not necessarily any more involved than other gifts. But if you are creating a new trust, make sure to give yourself plenty of time.

For a new trust, you need time to:

• Define the purposes of the trust
• Allow your attorney to draft the trust
• Have time to review draft documents and refine the terms of the trust
• Communicate with your beneficiaries and trustees
• Ensure all the relevant professionals (e.g., investment advisor, CPA) are aware of your plans
• Sign documents
• Establish trust accounts
• Document and complete your gifts

This process typically takes several months. When rushed, key factors can be overlooked.

In general, if a trust hasn’t been created by December, you will feel rushed. Close attention to detail and precise timing will be necessary to establish and fund the trust by year-end. Best practice is to begin the process to create a new trust by September, if not earlier.

Once a trust is established, move swiftly to fund the trust. While wire transfers can be completed on the same day in some cases, and on December 15 there still may be time to move securities, consider December 15 your deadline for funding if you want to have your gifting done by year-end.

And one additional, critical point if you are funding a so-called “Crummey” trust. With a “Crummey” trust, your beneficiaries are given the right to withdraw your gift from the trust to qualify your gift for the gift tax annual exclusion. The withdrawal right usually lasts for 30-60 days. Donors often will think they can make their gifts at year-end and the withdrawal can go into the next year. But ideally the entire withdrawal period should be in the current year for the gift to be complete for that year.

If you are creating a “Crummey” trust with a 30-day withdrawal period, generally push all your deadlines back an additional 30 days:

• Make your gift by November 30
• Create the trust by November 1
• Start the discussion as soon as possible, or by August 1

Summary of Transfer Deadlines at Fiduciary Trust International

All timeframes are approximate and assume receipt of instructions by 2pm EST or earlier cut-off on certain holidays. Delays by intermediaries and other unforeseen circumstances can occur.

• Domestic wire transfer: 1 - 2 business days
• Foreign wire transfers: 2 business days
• Foreign cables: 3 business days
• ACH transfer: 3 business days
• Securities (non-mutual fund) transfer: 1 week
• Mutual fund transfer: 2 weeks

Best Practice Timeframes for New Accounts or Trusts

All timeframes are approximate and assume diligent efforts to provide all necessary documents and information required by the relevant parties. Delays by intermediaries and other unforeseen circumstances can occur.

• Opening new individual accounts: 1 - 2 weeks
• Opening new entity or complex accounts (e.g., trusts, limited liability companies or partnerships, international): 3 - 4 weeks
• Creating and funding a new trust: 2 - 4 months; add an additional 30 to 60 days if making “Crummey” gifts to the trust