Cathy Curtis

How to Choose the Right Withholding on Your W-4

Tax Planning, Women and Money / /
W-4 Withholding

One of the most common questions I get is: “How many deductions should I take on my W-4?” The truth is, the IRS no longer uses “allowances” on the W-4 form. This changed in 2020, when the IRS redesigned the W-4 to make withholding calculations more accurate and easier to understand. Instead of allowances, the form now asks for specific income amounts, deductions, and credits to determine the right withholding. Here’s how to navigate these changes and ensure you’re withholding the right amount.

Step 1: Why the W-4 Changed

Before 2020, the W-4 form used allowances to determine how much tax to withhold. The more allowances you claimed, the less tax was withheld, and the fewer allowances, the more tax was withheld. However, this system often led to confusion and incorrect withholdings.

The change was driven by the 2017 Tax Cuts and Jobs Act (TCJA), which eliminated personal exemptions. Since allowances were tied to personal exemptions, they were no longer relevant, and the IRS needed a new approach. The new W-4 form now asks for specific financial details instead of an arbitrary number of allowances, making it easier to withhold the correct amount.

Step 2: Who Has to Fill Out a W-4?

Employees must fill out Form W-4, Employee’s Withholding Certificate, to determine how much federal income tax should be withheld from their paycheck. The following groups need to complete a W-4:

  • New Employees: Anyone starting a new job must fill out a W-4 so their employer knows how much tax to withhold. If you don’t submit a W-4, the employer will default to withholding at the “single with no adjustments” rate, which may result in higher withholding.
  • Employees Adjusting Withholding: If you owed a large tax bill last year or received a big refund, you may want to update your W-4 to better match your tax liability.
  • People Experiencing Life Changes: If you marry, divorce, have a child, or buy a home, your tax situation changes, and updating your W-4 ensures the correct withholding.
  • Employees with Multiple Jobs or a Working Spouse: The W-4 includes a section to help prevent under- or over-withholding for those with more than one income source.
  • Employees with Additional Income: If you earn side income (freelancing, dividends, rental income) but don’t want to pay estimated taxes, you can adjust your W-4 to have more withheld.

Step 3: Who Has to Fill Out a W-9 and When?

Unlike employees who fill out a W-4, independent contractors, freelancers, and self-employed individuals must complete Form W-9, Request for Taxpayer Identification Number and Certification. Here’s why and when you need a W-9:

  • Who Needs to Fill Out a W-9?
    • Independent contractors and freelancers
    • Self-employed individuals providing services to a company
    • Vendors receiving payments from a business
    • Anyone receiving non-employee compensation exceeding $600 in a tax year
  • When Do You Fill Out a W-9?
    • A business will request a W-9 before paying you for services.
    • You provide your Social Security Number (SSN) or Employer Identification Number (EIN) so the business can report payments to the IRS using Form 1099-NEC or 1099-MISC.
    • Unlike a W-4, a W-9 does not determine tax withholding—contractors are responsible for paying their own taxes, usually through quarterly estimated tax payments (Form 1040-ES).

Step 4: Review and Adjust Annually

Life changes quickly, and so can your tax situation. Review your W-4 at least once a year or when you:

  • Marry or divorce
  • Have a baby
  • Buy a home
  • Start a new job or change income levels
  • Owe a significant tax bill or receive a large refund

Final Thoughts

Many people still think they need to decide on the number of allowances for their W-4, but that system went away in 2020. Now, getting your W-4 right means more financial control—whether that means taking home a bigger paycheck or avoiding an unexpected tax bill. If you’re unsure, using the IRS calculator and reviewing your situation annually is the best way to keep things on track.

For those who work as independent contractors or freelancers, remember that you need a W-9 instead, and you are responsible for making your own tax payments.

Still have questions? Let’s talk! I’m happy to help you navigate your tax strategy so you can make the best financial decisions for your future.

If you found this information interesting, please share it with a friend!

How to Choose the Right Withholding on Your W-4 Read More »

Pretty Soon, It’ll Be Tax Time: Are You Ready?

Estate Planning, Tax Planning, Women and Money / /
Tax Season

As tax season approaches, it’s almost time for that annual ritual: gathering your W-2, 1099s, and other financial documents. Your accountant will send their trusty checklist—or maybe you’ll take on the task yourself, cramming like it is finals week to beat the deadline.

Or perhaps you’ll file an extension, hoping for a bit more breathing room. (A reminder: filing an extension doesn’t extend the deadline to pay tax. You must make an estimated payment by April 15 and then true it up when you officially file).  Some of us might miss the deadline entirely—something I highly recommend avoiding.

When I was single, I always filed my taxes on time. It felt like a huge weight lifted from my shoulders.

But after I got married, my husband took over tax prep, and suddenly, we were always filing extensions. It drove me crazy! These days, we have an accountant, and yes, they often file extensions too. It turns out there are valid reasons for this:

Reasons for Filing an Extension

  • Late K-1s: If you own alternative investments or receive trust income, you’ll need a Schedule K-1. These forms are notorious for being issued late, delaying your entire return.
  • Missing Information: Sometimes, clients don’t get all their documents to the accountant in time. (Guilty as charged?)
  • Overwhelmed Accountants: Some accountants take on too many clients and use extensions as a way to manage the workload.

If I were an accountant, I’d try to get everything done by April 15 just so I could take a long, well-earned vacation!

Unfortunately, there are consequences for not filing taxes on time…(by the way, filing an extension is a completely legitimate way to get more time to do your taxes, and it will not trigger an audit as many think. It is much better to file an extension than to do nothing and file late!

Not filing your taxes on time or failing to file altogether can lead to significant penalties and headaches. Here’s a quick rundown:

IRS Penalties

  • Failure-to-File Penalty: The IRS charges 5% of the unpaid taxes for each month (or part of a month) your return is late, up to 25% of your unpaid taxes.
  • Failure-to-Pay Penalty: If you don’t pay your taxes on time, you’ll be charged 0.5% of your unpaid taxes each month, up to 25%.
  • Interest Charges: The IRS also charges interest on unpaid taxes, which accrues daily from the original due date of your return.

Example: Suppose you owe $10,000 and don’t file or pay anything for three months. When you finally file, the interest and penalties would add an additional $1,850.00 to your tax bill.

The IRS penalties don’t stop there. Here are a few lesser-known reasons to stay on top of your tax obligations:

Beware of These Red Flags This Tax Season

  1. Solo 401(k) Filing Requirements: If you’re self-employed and have a Solo 401(k) with more than $250,000, you must file Form 5500 by July 31 or be subject to a $250-per-day penalty until you file. If this seems onerous, it is—the penalties were designed primarily to enforce compliance for large employer-sponsored retirement plans and prevent employers from mismanaging employee retirement funds. Unfortunately, Solo 401(k)s fall under the same penalty structure, even though they don’t pose the same risks.
  2. State Tax Nexus Issues: Working remotely or in multiple states might mean owing taxes in more than one state. Failing to file the correct state returns can lead to penalties and interest.
  3. Capital Gains Misreporting: Forgetting to report stock sales or underestimating the basis of your investments can trigger an IRS audit or unexpected tax bills.
  4. Health Savings Account (HSA) Mistakes: Overcontributing to an HSA or using HSA funds for non-qualified expenses can result in taxes and penalties.
  5. Gift Tax Filings: If you give someone more than $19,000 in a year (as of 2025), you need to file a gift tax return (Form 709), even if no taxes are due. Missing this step can complicate estate planning down the line.
  6. Failure to Report Cryptocurrency Transactions: The IRS is cracking down on unreported cryptocurrency gains. If you’ve traded or sold crypto, you must report it on your tax return.
  7. If you inherited an IRA and don’t take the correct distributions, the IRS imposes a 25% excise tax. They lower the excise tax if you correct the mistake within a correction window.
  8. IRA Rollovers: If you need cash for a short period of time and tap your IRA for it, there is no problem as long as you redeposit the money back into the IRA within 60 days. However, you can only do this once within a 12-month period. If you do more, the full amount is taxable; if you are under age 59 ½, there is also a 10% penalty.

Make Tax Season Work for You

Instead of scrambling at the last minute or risking penalties, consider these steps to make tax season easier:

  • Start Early: Gather your documents as soon as they’re available and set aside time to review them.
  • Work with a Professional: A CPA, Enrolled Agent, or financial advisor can help you navigate complex situations and minimize your tax burden.
  • Double-Check Everything: Avoid errors by reviewing your return carefully before filing.

Tax season may not be fun, but it’s a lot easier when you stay ahead of the deadlines and know the rules. Filing on time, avoiding penalties, and understanding your options can save you time, money, and stress. And isn’t that worth it?

For more financial planning tips and best practices, check out our free resources page.

If you found this information interesting, please share it with a friend!

Pretty Soon, It’ll Be Tax Time: Are You Ready? Read More »

Why Procrastinating on Finances is a Bad Idea

Retirement Planning, Simple Truths About Money, Tax Planning, Women and Money / /
Procrastinating on Finances

Let’s face it—money is hard. Few people relish the thought of sitting down to deal with their finances. It ranks right up there with dental visits, pap smears, and mammograms. Unlike healthcare, however, there’s no friendly reminder postcard urging you to get it done. It’s easy to procrastinate, and before you know it, years have passed without any financial planning.

Could things still work out despite the neglect? Sure, it’s possible. But chances are, something will go wrong, or you’ll miss opportunities to optimize your finances. And what does “optimizing your finances” mean? Let’s break it down.

1. Review Your Investments

Take a good look at your investments at least once a year. Are you overexposed to stocks? Underexposed? Stocks are the engines that drive long-term returns—just look at the S&P 500’s historical 10% average annual return over the past 20 years.

But too much of a good thing can backfire. If you’re too heavily invested in stocks, a market downturn might tempt you to panic and sell, locking in losses. Bear markets (defined as a 20% or greater drop from recent highs) are inevitable. The key is staying invested for the long haul to benefit from eventual recoveries.

2. Be Tax-Smart

No one enjoys watching 25–30% of their paycheck disappear into taxes. While taxes fund essential services, there are perfectly legal ways to reduce your tax burden. Here are a few strategies:

  • Donate appreciated shares to a donor-advised fund to align your charitable giving with tax savings.
  • Open a Health Savings Account (HSA) with a high-deductible health plan to deduct contributions directly from your income.
  • Boost your Roth savings with strategies like a Backdoor Roth or Roth Conversion.
  • Max out contributions to your 401(k), 403(b), or other retirement plans.
  • Engage in tax-loss harvesting to offset gains and reduce taxable income.

3. Define Your Goals

Set your short-, medium-, and long-term goals—and write them down. Studies consistently show that writing down goals increases the likelihood of achieving them.

For example, one of my big goals is to own a home in Sonoma County—ideally in Sebastopol or Healdsburg—within the next five years. Having this goal in writing makes it more tangible and actionable.

4. Plan for Retirement

Think about when you want to retire—or when you’d like to leave your current job to pursue something more meaningful. This kind of transition requires thoughtful planning, clear goals, and detailed number crunching. The earlier you start, the better positioned you’ll be to make it a reality.

Why Start Now?

Every one of these actions underscores why procrastination is a financial mistake. Planning gives you a clear picture of where you’re headed and what you need to do to get there.

January is a natural time for fresh starts, so why not begin today? Whether it’s reviewing your investments, setting goals, or planning for retirement, even small steps can make a big difference. Take action now—your future self will thank you.

If you found this information interesting, please share it with a friend!

Why Procrastinating on Finances is a Bad Idea Read More »

The Intricate Dance of Charitable Giving and Taxes: What You Need to Know

Charitable Giving, Tax Planning, Women and Money / /
Charitable Giving and Taxes

Charitable giving is about more than just supporting causes you care about—it’s also an opportunity to make a tax-savvy move. But like most things tax-related, it’s rarely simple. Let’s unravel the complexities of charitable giving and taxes to help you maximize your generosity and tax benefits.

Federal Tax Rules: What Changed After 2017?

Remember the Tax Cuts and Jobs Act (TCJA) of 2017? It nearly doubled the standard deduction, which is great for simplifying taxes but complicated things for deducting charitable contributions.

Standard Deduction for 2024:

  • $14,600 for single filers
  • $29,200 for married couples filing jointly

Note that there is an additional standard deduction of $1,950 for single filers and
1,550 for married filing jointly for those 65 and older.

Here’s the catch: if your total itemized deductions (like mortgage interest, state and local taxes, and charitable donations) don’t exceed the standard deduction, you can’t claim a federal tax break for your contributions.

And Even If You Itemize…

The IRS limits how much of your Adjusted Gross Income (AGI) you can deduct:

  • Cash Donations: Deductible up to 60% of your AGI.
  • Appreciated Securities: Deductible up to 30% of your AGI.

Donations exceeding these limits can carry over for up to five years, but the rules are precise and unforgiving.

The Bunching Strategy: A Smart Workaround

Here’s a clever approach: bunching. Instead of donating $5,000 annually, donate $15,000 every three years.

  • In “bunching” years, itemize to claim the deduction.
  • In off-years, take the standard deduction.

Donor-advised funds (DAFs) make this even easier. Contribute a lump sum to a DAF in your itemizing year for the tax break, then distribute donations to your favorite charities over time.

Donor-Advised Funds (DAFs): A Strategic Giving Tool

Think of a DAF as your personal charitable giving account. You can contribute funds—or better yet, appreciated securities that you’ve held for more than one year.

Why the “long-term” holding period? It’s key to maximizing your tax benefits. When you donate appreciated securities that you’ve held for over a year, you avoid capital gains taxes and get a deduction for the full fair market value of the asset.

Example:
Let’s say you bought stock for $5,000, and now it’s worth $15,000. By donating it to a DAF:

  • You bypass capital gains tax on the $10,000 growth.
  • You get a charitable deduction for the full $15,000.

But here’s the golden rule: if the stock was held for less than one year, the deduction is limited to your cost basis—not its market value. Timing is everything.

Once the funds are in your DAF, you can invest them for growth or distribute them over time to your favorite charities. Just remember: don’t let your DAF become a parking lot for charitable dollars. Charities need support now, so make it a habit to grant funds regularly.

Qualified Charitable Distributions (QCDs): A Game-Changer for Retirees

If you’re 70½ or older, QCDs offer a unique advantage. You can donate up to $100,000 directly from your IRA to a charity.

  • QCDs count toward your Required Minimum Distribution (RMD).
  • They don’t increase your taxable income.

This is perfect for retirees who don’t itemize but still want to give strategically.

Non-Deductible Donations

Not all giving qualifies for a tax break.

  • GoFundMe or Crowdfunding: Usually not deductible unless the recipient is a 501(c)(3) nonprofit.
  • Political Donations: Contributions to candidates, PACs, or ballot initiatives are never tax-deductible.

Why Giving Feels Good Beyond the Tax Break

Don’t lose sight of the real reward: the joy of giving. Studies show that charitable acts enhance emotional well-being and deepen community connections. Tax benefits are just the cherry on top.

Final Thoughts on Charitable Giving and Taxes

Charitable giving is about more than tax strategy—it’s about making a real difference. Whether you’re supporting food banks, funding medical research, or championing the arts, every gift matters.

So, give with your heart—and maybe a little strategy, too.

Want to dive deeper into the intricacies of charitable giving? Check out our four-part blog series.

If you found this information interesting, please share it with a friend!

The Intricate Dance of Charitable Giving and Taxes: What You Need to Know Read More »

Navigating Market Uncertainty During Trump’s Second Term

Financial Planning, Investment Management, News, Women and Money / /
Market Uncertainty

The news cycle is buzzing with speculation about what Donald Trump’s second term might mean for the economy. His agenda could be highly disruptive with priorities like imposing tariffs, expanding domestic energy, extending tax cuts, deporting undocumented immigrants, and deregulating industries.

However, the outcome is uncertain, and investors don’t like uncertainty. This could result in a bumpy ride in the market in the coming months.

Market Volatility: Yes, It’s Unnerving, But It Doesn’t Imply Direction Of The Market

Widely fluctuating balances in your accounts can be unnerving, especially with political drama. It’s hard not to think, “This time, it’s different.” This instinct to hit “sell” and wait for calmer waters can be intense.

But history shows us that markets are resilient. Under most presidents—Democrat or Republican—the S&P 500 has delivered solid long-term returns.

5 Smart Moves to Protect Your Financial Plan Against Market Uncertainty

So how can you stay calm and confident when the markets are swinging? Start here:

  1. Build a Cash Safety Net
    Life happens. Whether it’s an unexpected expense or the emotional comfort of having “what if” money, a solid cash reserve is your best defense against uncertainty. Aim for 3–6 months of living expenses.
  2. Resist the Urge to Overreact
    Markets don’t reward panic. Don’t overhaul your portfolio based on headlines or short-term fears. Instead, stick to your investment plan unless there’s a clear, data-driven reason to adjust.
  3. Reassess Your Risk Tolerance
    If this latest bout of volatility has you losing sleep, it may be time to revisit your risk profile. But remember pulling out of the market entirely is rarely a winning move.
  4. Take a Break from Portfolio Watching
    We get it—refreshing your account balance every day is tempting. But constant monitoring during volatile times can lead to stress and bad decisions. Trust your plan and give yourself some breathing room.
  5. Stay Consistent with Your Investments
    Keep making those regular contributions, even when the markets feel rocky. Dollar-cost averaging helps you take advantage of dips, positioning your portfolio for future growth.

The Best Course: Stay Disciplined

Know that the financial decisions you make today set the foundation for your future. Whether you’re planning for retirement, supporting a family, or building generational wealth, staying disciplined during market uncertainty is key to achieving your goals.

Remember, investing isn’t about timing the market—it’s about time in the market.

For more financial planning tips and best practices, check out our free resources page.

If you found this information interesting, please share it with a friend!

Navigating Market Uncertainty During Trump’s Second Term Read More »

Empowering Change: What You Can Do Post-Election

Philanthropy, Productivity, Women and Health, Women and Money / /
Election

The aftermath of a contentious election can feel overwhelming, especially when the results challenge the values and causes you hold dear. It’s natural to experience disappointment, frustration, or even grief in moments like these. However, the strength of democracy lies in its resilience—its ability to evolve and adapt through sustained participation, not just the results of a single election.

This moment can serve as a catalyst for meaningful action. Many of my clients have found ways to channel their frustration into purposeful work—whether by advocating for causes they care about, increasing donations to impactful organizations, or simply becoming more engaged in their communities. These actions often lead to a renewed sense of empowerment and the opportunity to make a tangible difference.

History reminds us that transformative social movements often begin with small groups of committed individuals united by a vision for a better future. Whether you’re new to activism or a seasoned advocate, here are some constructive ways to redirect your energy toward building a brighter tomorrow.

#1: Make a Positive Impact in Your Community Post-Election

National politics can sometimes feel abstract or out of reach, but local government directly impacts our daily lives. Decisions about education, zoning, housing, and community development often happen at the municipal level, where your voice can carry significant weight.

If you’re ready to take an active role, consider running for a local position such as school board or city council. These roles allow you to influence policies that shape your community. Not quite ready for that step? Start by joining municipal committees, attending public meetings, or volunteering with local organizations. Your consistent participation and thoughtful input can drive meaningful change.

Grassroots organizing is another powerful way to make a difference. Connect with movements aligned with your values or launch your own initiative to address specific local issues. Effective community work often begins with small, tangible projects. For instance, organizing a neighborhood clean-up, launching a community garden, or hosting forums to discuss local challenges can lead to visible improvements while fostering trust and collaboration.

These small actions build the foundation for broader progress. When people with diverse perspectives unite around shared goals—such as improving public safety, revitalizing neighborhoods, or enhancing schools—their collective efforts create lasting change.

#2: Get Involved in State and Local Politics

While presidential elections dominate headlines, state and local elections often have a greater immediate impact on critical policies like education, voting rights, and healthcare access. These elections are frequently decided by narrow margins, meaning your engagement can make a significant difference.

Now is the time to prepare for the 2026 midterms and other local races. Research candidates, study district demographics, and identify ways to boost voter turnout in your area. Deepening your involvement with your local political party or advocacy group can amplify your efforts. Attend meetings, join committees, or even take on a leadership role like precinct captain.

Precinct captains are vital connectors between political parties and their communities. They organize voter outreach, coordinate get-out-the-vote efforts, and mobilize neighbors around shared goals. If you prefer behind-the-scenes work, activities like phone banking, managing voter databases, or helping with campaign logistics are equally impactful.

Sustained engagement is key. The work you do today builds momentum for tomorrow, helping to create a foundation for meaningful victories in the future.

#3: Champion Causes That Matter to You Post-Election

Making a difference in the world often starts with small, intentional steps. If you’re passionate about environmental protection, social justice, or another cause, there are numerous ways to contribute your time, skills, or resources.

For example, if climate change resonates with you, connect with local conservation groups or environmental organizations. In the Bay Area, groups like the Golden Gate Bird Alliance or Urban Sprouts offer opportunities to volunteer for habitat conservation, community gardening, or food justice initiatives.

For those with specialized skills, like legal expertise, consider offering your services to social justice organizations. The East Bay Community Law Center, for example, supports low-income residents with legal aid, offering a meaningful way to directly impact lives.

Educational workshops are another avenue for change. Hosting forums on topics like voting rights or environmental justice can raise awareness, spark important conversations, and inspire collective action.

#4: Invest in Future Generations

One of the most powerful ways to create lasting change is by empowering the next generation. Establishing or contributing to college savings accounts can help children in your family—or underserved communities—gain access to higher education.

Volunteering as a mentor is another impactful way to share your knowledge and inspire young people. Many students are eager to learn about civic engagement, environmental advocacy, or social justice. By guiding them, you can spark their passion and help shape future leaders. If you’re an employer, consider offering internships to provide hands-on experience and open doors to fields they might not otherwise access.

Supporting civic education can also make a lasting impact. Partner with schools to enhance programs that teach democratic processes or help students register to vote. Mentoring student government organizations fosters informed, engaged citizens who are empowered to advocate for change.

Building a Better Future, One Action at a Time

While the outcome of an election may feel disheartening, it’s important to remember that democracy is a long-term effort. Progress often happens incrementally, through sustained participation and collective action. Each step you take—no matter how small—creates ripples that strengthen the fabric of our society.

Your commitment to meaningful action is what drives lasting change. Stay engaged, remain hopeful, and focus on what you can do today to help shape a brighter future. Together, we can build a more resilient and inclusive democracy.

If you found this information interesting, please share it with a friend!

Empowering Change: What You Can Do Post-Election Read More »

Estate Planning Considerations Ahead of Potential TCJA Expirations

Estate Planning, Financial Planning, Tax Planning, Women and Money / /

The Tax Cuts and Jobs Act (TCJA) of 2017 brought significant changes to estate planning, notably increasing exemptions for estate, gift, and generation-skipping transfer taxes. These changes have provided high-net-worth individuals and families with greater opportunities to transfer wealth to their beneficiaries while mitigating taxes.

However, with key provisions of the TCJA set to expire in 2025, it may be time to revisit your estate plan. Even if your portfolio is way below the exemption amounts (below), compounding returns are a powerful wealth builder, and your future values could quite possibly reach and exceed the limits.

 It must be noted though, that Congress will debate the expiration of these tax provisions, and we do not know the outcome yet.

Key Tax Changes Under the TCJA of 2017

The Tax Cuts and Jobs Act (TCJA) of 2017 meaningfully reshaped the tax landscape, offering wealthy individuals and families a way to pass more assets to beneficiaries tax-free. Key legislative changes included:

It’s important to note that these TCJA estate planning provisions are set to expire at the end of 2025 unless Congress votes to extend them. Depending on your individual circumstances, taking advantage of the current high limits, you can potentially preserve more of your estate from tax.

Estate Planning Strategies to Be Aware Of

With the expiration of the TCJA approaching, now is an opportune time to explore strategies that align with your values and long-term goals.

#1: Lifetime Gifting

To make the most of the current elevated exemptions before the Tax Cuts and Jobs Act (TCJA) expires, several gifting strategies can help transfer wealth efficiently while minimizing tax burdens:

  • Creating Irrevocable Trusts. By transferring assets into an irrevocable trust, you effectively remove them from your taxable estate, which helps shield them from estate taxes when the TCJA exemptions potentially decrease in 2026. Additionally, you can structure an irrevocable trust to retain control over how and when beneficiaries access the assets, providing peace of mind that they’ll use your wealth according to your wishes. Keep in mind that irrevocable means that once the trust is executed, it cannot be changed.
  • Direct Payment of Medical or Educational Expenses. Payments made directly to medical institutions or schools aren’t subject to the annual gift tax exclusion or the lifetime exemption, meaning they don’t count against your gifting limits. This is a tax-efficient way to provide significant financial support to your loved ones without reducing your lifetime exemption, and it allows you to give in a meaningful way without adding to their taxable income.
  • Transferring Appreciating Assets. Another key strategy is to transfer appreciating assets, such as stocks, real estate, or business interests, while their value is still growing. By gifting these assets before they appreciate further, you can reduce your taxable estate while allowing the recipient to benefit from future growth.

Each of these approaches offers unique advantages and can be tailored to fit your financial goals and family’s needs.

#2: Dynasty Trusts

If you have grandchildren or great-grandchildren, advanced estate planning strategies like dynasty trusts can be highly effective for preserving wealth across multiple generations.

A dynasty trust is a long-term trust that enables the transfer of wealth from one generation to the next, often over several decades or even centuries. This type of trust not only helps protect your legacy but also shields the assets from potential risks such as creditors, lawsuits, and divorces, ensuring your family’s financial security for years to come.

You can also structure the trust in a way that minimizes or eliminates estate taxes, gift taxes, and generation-skipping transfer (GST) taxes, allowing your family to benefit from the full value of the assets you’ve transferred. By establishing the trust while the current elevated exemptions are in place, you can lock in these favorable tax treatments before the TCJA provisions expire in 2026.

#3: Grantor Retained Annuity Trusts (GRATs)

For those seeking more sophisticated estate planning strategies, Grantor Retained Annuity Trusts (GRATs) can be an effective tool for transferring future appreciation of assets in a tax-efficient manner ahead of potential TCJA expirations.

A GRAT allows you to place high-growth assets, such as stocks or real estate, into a trust while retaining the right to receive fixed annuity payments over a specified term. The key benefit is that any appreciation in the assets above the IRS’s assumed growth rate passes to your beneficiaries tax-free at the end of the trust’s term.

This strategy works particularly well in a low-interest-rate environment, where the hurdle rate is low, allowing more of the appreciation to avoid gift taxes. Since the grantor retains the annuity payments, the initial gift value is minimal, often resulting in little or no taxable gift.

#4: Charitable Lead Trusts (CLTs)

Charitable Lead Trusts (CLTs) offer a unique way to support charitable causes while also benefiting your heirs in a tax-efficient manner.

In a CLT, you transfer assets to the trust, which then provides regular payments to a charity of your choice for a specified period. After this term ends, the remaining assets in the trust pass to your heirs, often with little or no gift or estate tax.

This strategy not only enables you to make a meaningful impact on the causes you care about, but it also helps reduce the taxable value of your estate. Because the value of the charitable payments is deducted from the overall gift, the remaining value that eventually goes to your heirs can be significantly discounted for tax purposes.

#5: Family Limited Partnerships (FLPs)

Family Limited Partnerships (FLPs) can be a powerful estate planning tool ahead of potential TCJA expirations.

An FLP allows you to transfer ownership of assets, such as real estate, investments, or a family business, to a partnership structure. Typically, senior family members (parents or grandparents) act as general partners, maintaining control over the management of the assets, while younger family members become limited partners with ownership interest but without decision-making authority.

The primary benefit of an FLP is the ability to transfer wealth to heirs at a discounted value. Because limited partners lack control and marketability, the IRS often allows a discount on the value of the partnership interests for gift and estate tax purposes, effectively reducing the taxable value of the transferred assets.

FLPs also offer the added benefit of asset protection, as creditors may find it difficult to access assets held within the partnership. This structure helps ensure long-term wealth management and continuity within families.

Estate Planning and the TCJA: Recommitting to Your Plan

Estate planning is never a one-size-fits-all solution. The most effective strategies are those tailored to your unique circumstances, financial goals, and family dynamics. A thoughtful estate plan strikes a delicate balance between tax efficiency, asset protection, and—most importantly—caring for the people and causes that matter most to you.

Regularly revisiting and updating your plan ensures that it evolves with changes in your life, such as new financial situations, family additions, or shifting priorities. By engaging in open discussions with your family and trusted advisors, you can craft a plan that truly reflects your values and ensures your legacy endures for generations.

For more financial planning tips and best practices, check out our free resources page.

If you found this information interesting, please share it with a friend!

Estate Planning Considerations Ahead of Potential TCJA Expirations Read More »

S5E8: Leaving a Legacy of Love with Professional Fiduciary Sara Ecklein

Financial Finesse Podcast / /
Professional Fiduciary

Exploring the Role of a Private, Professional Fiduciary

My guest today is Sara Ecklein, a private professional fiduciary and the founder of Trust and Honor. Sara and I explore the intricacies of her role, from acting as a trustee, executor, or agent under various legal capacities, to the benefits of having a neutral party manage sensitive family and financial issues.

We also discuss the importance of proactive estate planning, especially for solo agers and blended families, and the peace of mind it offers. Finally, Sara shares success stories that highlight her impact as a fiduciary and the importance of a well-prepared estate plan, as well as the launch of her upcoming podcast, The Legacy of Love, which aims to make estate planning more approachable and less daunting.

Episode Highlights

  • [02:48] The role of a professional fiduciary.
  • [08:22] Common estate planning challenges.
  • [11:01] The importance of trust and neutrality in estate management.
  • [16:02] How to hire a professional fiduciary.
  • [23:09] The role of a trustee and power of attorney.
  • [25:05] Healthcare decision-making and client relationships.
  • [36:40] Introducing the Legacy of Love Podcast.

Links Relevant to this Episode

Sara’s Website: Trust and Honor

The Legacy of Love Podcast

Financial Finesse S4E6: The Unexpected Benefits of Working with a Private, Professional Fiduciary with Sara Ecklein

Enjoy the Full Episode

Subscribe on Apple Podcasts

Do you love Financial Finesse? Please leave us a review on Apple Podcasts!

For more financial planning tips and strategies, check out our Free Resources.

If you found this information interesting, please share it with a friend!

S5E8: Leaving a Legacy of Love with Professional Fiduciary Sara Ecklein Read More »

Navigating Uncertain Times: How Financial Planning Can Reduce Anxiety and Boost Self-Care

Cash Flow Planning, Financial Planning, Women and Money / /

Practicing financial self-care through thoughtful financial planning can provide a sense of control and stability, helping to reduce anxiety and improve overall well-being.

In today’s fast-paced world, uncertainty is a constant companion. From global pandemics and economic shifts to political upheavals and personal life changes, it feels like we’re always navigating uncharted territory. These unpredictable events don’t just disrupt our external world—they can deeply affect our personal finances and mental health. The stress of the unknown often leads to anxiety, which seeps into our daily routines and clouds our long-term outlook.

Yet, in the midst of all this, there’s one powerful tool that can help: financial planning. More than just numbers and budgets, thoughtful financial planning acts as a form of self-care. It offers a sense of control and stability when everything else feels uncertain. By taking deliberate steps to manage our finances, we not only protect our future but also reduce anxiety and foster a greater sense of well-being today.

Understanding Anxiety Triggered by Uncertainty

While many factors can trigger financial anxiety, presidential elections often stand out as significant stressors. According to an August 2024 survey by the Thriving Center of Psychology, 72% of Americans report feeling stressed about the upcoming election. Interestingly, the impact is more pronounced among women—61% cite high stress levels, compared to 45% of men.

Presidential elections tend to heighten anxiety because of their broad implications. For instance, they can shape economic policies, healthcare systems, and social programs, all of which have a direct influence on personal finances. The uncertainty surrounding potential policy changes can leave people feeling uneasy about their financial future.

The disproportionate stress among women may be driven by several factors. Women often face unique financial challenges, such as wage gaps and career interruptions due to caregiving responsibilities. Additionally, concerns over healthcare access, childcare costs, and other vital issues—many of which are directly impacted by election outcomes—may further amplify stress.

Despite these unknowns, strong financial planning strategies can offer a sense of stability, no matter the political climate. By focusing on your personal financial goals and building financial resilience, you can alleviate some of the stress that inevitably comes with an upcoming presidential election.

The Psychology of Financial Planning During Uncertain Times

Financial stability is a cornerstone of overall well-being, significantly influencing both our physical and mental health. According to the American Psychological Association’s 2022 Stress in America survey, 66% of adults cite money as a major source of stress, underscoring the deep connection between financial health and mental well-being.

Taking a proactive approach to financial planning during uncertain times can offer a sense of control. While we may not be able to predict or influence external events—like economic downturns or political changes—we can still manage our personal financial decisions, which can help counteract feelings of helplessness.

Furthermore, focusing on actionable steps—such as creating a budget, building an emergency fund, or exploring investment options—provides cognitive benefits. In fact, research shows that the act of financial planning itself can lead to better mental health outcomes. For example, Northwestern Mutual’s 2024 Planning & Progress Study revealed that 64% of people who engage in financial planning with an advisor report feeling financially secure compared to only 29% of those who don’t.

Key Financial Planning Strategies as Self-Care Practices

By creating a roadmap for the future, financial planning empowers us to envision and work toward a stable, secure future—even when the present feels overwhelming.

Start by establishing an emergency fund with enough to cover 3-6 months of expenses and make contributing to it a consistent priority. This safety net helps provide peace of mind, allowing you to navigate financial surprises without added stress.

In addition, diversifying your investments across various asset classes and markets is essential. This creates a more balanced portfolio, mitigating the risks associated with market volatility.

If cash flow is a concern, be sure to regularly review and adjust your budget. Look for areas where you can cut back or redirect spending, ensuring your financial choices align with your personal values and goals.

Lastly, don’t lose sight of your long-term objectives. Even during turbulent times, staying focused on milestones like retirement or homeownership can help you maintain perspective and build momentum toward financial security.

Practical Tips for Implementing Financial Self-Care

Implementing financial self-care doesn’t have to feel daunting. Here are some tips for incorporating self-care into your daily life:

  • Craft a personal financial mission statement that reflects your core values and long-term goals. This will serve as your financial North Star, guiding every decision and keeping you focused on what truly matters.
  • Make technology your ally by setting up automated savings and investments. Automation helps you stay on track, ensuring you’re consistently working toward your goals, even when life gets hectic.
  • Conduct regular financial check-ins by yourself or with a partner. These scheduled sessions give you the opportunity to review your progress, adjust where needed, and realign with your financial mission statement.
  • Celebrate your financial milestones, no matter how small. Whether it’s paying off a credit card, reaching a savings goal, or making your first investment, acknowledging these wins reinforces positive habits and boosts your motivation.

Remember, financial self-care is a journey, not a destination. Every step forward, no matter the size, is a victory worth celebrating.

Additional Considerations

While financial planning can be a powerful form of self-care, maintaining your mental and emotional well-being extends far beyond managing your personal finances. Consider the following strategies to complement your financial self-care routine:

  • Manage your information intake. Set boundaries on media consumption to avoid information overload, and choose reliable, non-partisan financial news sources to stay informed without unnecessary stress.
  • Stay focused on your personal financial goals. Emotional, reactive decisions based on temporary events can derail long-term strategies. Staying the course helps protect both your finances and peace of mind.
  • Don’t hesitate to seek support. Professional financial advice can offer expert guidance tailored to your specific situation, helping you navigate any complexities that arise. Additionally, building a supportive network of friends or family with whom you can discuss financial concerns can provide both emotional encouragement and fresh perspectives.

Maintaining Perspective During Uncertain Times

In times of uncertainty, it’s crucial to focus on what you can control. Your financial journey is uniquely personal, and every small step you take moves you closer to long-term success.

Remember, you don’t have to navigate this journey alone. I partner with my clients to provide guidance and support as life’s financial challenges and decisions arise. By proactively managing your financial future, you’re not just improving your financial health—you’re also boosting your mental and emotional well-being, creating a stronger foundation for overall happiness and resilience.

For more financial planning tips and best practices, check out our free resources page.

If you found this information interesting, please share it with a friend!

Navigating Uncertain Times: How Financial Planning Can Reduce Anxiety and Boost Self-Care Read More »

Making the Most of Your Medical Expenses: A Tax Savings Opportunity for 2024

Healthcare and Money, Tax Planning / /
Deductible Medical Expenses

Deductible medical expenses are an often overlooked tax savings opportunity that can substantially lower your tax bill.

With healthcare costs on the rise, it’s easy for medical expenses to accumulate quickly. From preventive care to unforeseen medical emergencies, these costs can have a significant impact on your financial well-being.

However, there’s an often-overlooked aspect of these expenses that deserves attention: their potential to provide tax relief. The Internal Revenue Service (IRS) offers provisions that allow eligible individuals to deduct qualified medical expenses, potentially resulting in considerable tax savings.

If you, your spouse, or your dependents have incurred noteworthy medical expenses this year, you may be in a position to take advantage of these tax deductions. Here’s what you need to know to make the most of this potentially valuable tax benefit.

Why Track Your Medical Expenses?

If you plan to itemize deductions on Schedule A of Form 1040 instead of taking the standard deduction, you can potentially reduce your taxable income through deductible medical expenses. For the 2024 tax year, the IRS allows you to deduct the portion of your out-of-pocket medical expenses that exceeds 7.5% of your adjusted gross income (AGI).

If your medical costs have been considerable, these deductions could substantially lower your tax bill. For example, if your AGI is $100,000 and you’ve incurred $10,000 in qualified medical expenses, you could deduct $2,500 (the amount exceeding 7.5% of your AGI, which is $7,500 in this case).

What Qualifies as a Deductible Medical Expense?

The IRS provides a broad definition of deductible medical expenses that encompasses a wide range of health-related costs. These include costs for diagnosing, treating, or preventing disease, as well as treatments affecting any part or function of the body.

This comprehensive definition covers many common healthcare expenses, including:

  • Health insurance premiums, including Medicare premiums (keep in mind that any premiums you deduct from your paycheck on a pre-tax basis aren’t eligible)
  • Out-of-pocket costs for doctors, dentists, and hospital stays
  • Diagnostic tests and prescription drugs
  • Medical equipment and supplies
  • Long-term care insurance premiums

However, the list doesn’t end there. Many taxpayers are unaware of additional eligible expenses that could further reduce their tax liability. These lesser-known deductible expenses might include:

  • Travel costs related to medical care, including mileage, parking, and tolls
  • Home modifications for medical reasons, such as wheelchair ramps or stair lifts
  • Newborn care, including breast pumps and certain prescription baby formulas
  • Diabetes-related costs, such as blood-testing kits and insulin
  • Certain alternative treatments like acupuncture or chiropractic care
  • Prescription glasses, contact lenses, hearing aids, and even LASIK surgery.

It’s important to note that cosmetic procedures, general health supplements, and over-the-counter medications typically don’t qualify unless your doctor prescribes them for a medical condition.

Easily Overlooked Medical Expenses

It’s easy to inadvertently leave money on the table by overlooking less obvious eligible medical expenses. Being aware of these often-missed deductions can significantly impact your tax savings.

Here’s an expanded list of easily overlooked expenses that may qualify for deduction:

  • Service animals: The costs associated with buying, training, and maintaining service animals for individuals with disabilities are deductible.
  • Comprehensive dental care: Beyond routine cleanings, expenses for orthodontics (such as braces), dentures, dental implants, and even certain cosmetic dental procedures deemed medically necessary are deductible.
  • Substance use disorder treatment: Costs for inpatient treatment at therapeutic centers, outpatient programs, and transportation to and from support group meetings (like Alcoholics Anonymous) may qualify.
  • Reproductive health expenses: This category is broader than many realize, encompassing fertility treatments, in vitro fertilization, birth control, pregnancy tests, and vasectomies.
  • Wigs for medical conditions: Patients who experience hair loss due to medical treatments or conditions like alopecia can deduct the cost of wigs when prescribed by a physician.
  • Special education: Tuition for children with learning disabilities at specialized schools, as well as tutoring fees recommended by a doctor, may qualify.

Remember, proper documentation is key to claiming these deductions. Be sure to consult with a tax professional to ensure you’re maximizing your eligible expenses while staying compliant with IRS regulations.

Standard Deduction vs. Itemizing: Which is Better?

For the 2024 tax year, the standard deduction amounts are:

  • Single Filers and Married Filing Separately: $14,600
  • Head of Household: $21,900
  • Married Filing Jointly or Surviving Spouse: $29,200

Before opting to itemize, it’s essential to calculate whether your total itemized deductions would exceed these standard deduction amounts. The most common itemized deductions generally include:

  • Medical expenses (exceeding 7.5% of your AGI)
  • Mortgage interest
  • State and local taxes (SALT), including income and property taxes (capped at $10,000)
  • Charitable contributions

To determine which option is more beneficial:

  1. Sum up your potential itemized deductions, including medical expenses, mortgage interest, SALT (up to the $10,000 limit), and charitable donations.
  2. Compare this total to your applicable standard deduction amount.
  3. Choose the higher of the two figures to maximize your tax benefit.

It’s worth noting that the IRS requires some taxpayers to itemize, such as married individuals filing separately (if your spouse itemizes). Given the complexities involved, it’s advisable to use tax preparation software or consult a tax professional to ensure you’re making the most advantageous choice for your situation.

Approaching Healthcare Expenses Strategically

As the year draws to a close, consider your healthcare situation strategically. If you’ve already met your insurance deductible, it might be financially prudent to schedule any pending medical procedures or appointments before the year ends. This approach could increase your deductible medical expenses for the year, pushing you over the threshold for claiming deductions.

Additionally, take this opportunity to organize your medical receipts and documentation. Diligently tracking your healthcare costs can help you take full advantage of available deductions, potentially reducing your tax liability for the 2024 tax year.

Lastly, while tax savings are important, your health should always be the primary concern. Always make medical decisions based on your healthcare needs first and consider the tax implications as a secondary benefit.

By being proactive and informed about medical expense deductions, you’re not just potentially lowering your tax bill—you’re taking a step towards more comprehensive financial management. Your future self (and your wallet!) will thank you for the foresight and careful planning.

Looking for more financial planning tips like this? Check out these free resources.

If you found this information interesting, please share it with a friend!

Making the Most of Your Medical Expenses: A Tax Savings Opportunity for 2024 Read More »

Sudden Wealth Checklist

Overwhelmed by sudden wealth?

Don’t navigate sudden wealth alone! Download our free guide, The Essential Sudden Wealth Checklist, and discover how to transform your windfall into lasting prosperity. 

Claim your free digital copy!
Curtis Financial Planning