As a Certified Public Accountant and Certified Financial Planner professional, I deal with uncertainty on a daily basis. Clients progressing through different life stages, volatile financial markets and keeping up to date with ever changing tax laws are a few examples of this daily uncertainty. Our Keller/KMH staff field a steady stream of pertinent questions and concerns from our clients on a daily basis. I’d like to share with you some of the more relevant and relatable questions below.
Perhaps the most prevalent question pertains to status of tax laws. My colleague, Lane Keller, wrote about this very topic almost a month ago in an article titled “More tax talk 2021” where he advised you to be prepared for coming change on the tax law front. I would expand on that by recommending you visit soon with your tax professional to have them prepare a 2021 tax projection for you. Did you receive the full $1,400 payment from the third stimulus package? What strategy did you choose for Advance Child Tax Credit payments? Should you consider Roth conversions to utilize historically low tax rates? Gaining clarity on your 2021 tax situation will help build certainty moving into the back half of 2021.
Sticking with the theme of uncertain tax laws, our office is also fielding multiple inquiries about the president’s proposals to dramatically change the estate tax landscape. Most of the discussion and consideration focuses on whether or not to utilize the high lifetime gift exemptions (currently $11.7 million per person). We have many clients who have recently utilized or are in the process of creating partnerships, trusts or other entities to facilitate these gifting transactions. The important takeaway is to meet with your estate planning team sooner rather than later to evaluate your plan. This will set you up to be able to proactively manage any tax law changes that may develop.
Another popular question relates to the stock market and what its future may hold. Undoubtedly, the stock market has experienced excellent returns in the past few years. It is also just as certain the market will experience another correction at some point in time. Our philosophy is that portfolio management should be driven by your financial plan. Each client’s situation, station of life and goals are unique to them and their portfolio should be constructed and managed to accommodate those factors. This allows your portfolio to inherently be built with a long-term perspective in mind. The value we add to our clients is to maintain rigorous discipline in both good and bad markets to keep them on track to achieve their goals. My advice would be to focus on a long-term asset allocation that works for you and in unison with your overall financial plan, then drown out the day-to-day noise about the markets.
While there is no solution to totally eliminate these uncertainties, I hope these answers will reassure you that you are not alone with your questions. Begin working with a CPA and/or Certified Financial Planner professional to gain some certainty on your financial situation.