Four pro tips for year-end financial planning

[December 02, 2015]  By Beth Pinsker

NEW YORK (Reuters) - The New Year's Eve ball starts to drop for David Demming on Labor Day. That is when his firm, Demming Financial Services Corp, in Aurora, Ohio, starts going over all of its clients' accounts to see what needs to be done before the year ends.

Other financial advisers may start a little later, but most are in high gear by Thanksgiving. They call clients one by one to review tax strategies and capture all the gains or losses they can by Dec. 31.

"The curtain is going to come down, and you're going to lose the opportunity to do certain things," Demming said.

For those panicking as the year winds down, it is not too late to hire help. Many advisers still have time to meet new clients, though most wait until January.

"There is definitely a New Year's swell," said Brian Power, a principal of Gateway Advisory in Westfield, New Jersey.

Here are some things you need to do before Dec. 31:

1. Monitor your gains and losses

In this year of flat to slightly positive portfolio returns, Power is busy offsetting the capital gains of previous years with tax-loss selling.

His biggest issue: Clients do not always call him back with the greatest sense of urgency. "They've gotten your two messages and then call Dec. 20 and want to get stuff done," Power said.

Harvesting tax losses requires getting stocks that are not doing well off your books. You can take a loss of up to a $3,000 per year.

If you need help but not a full-service financial adviser, Web-based services like Wealthfront (http://wealthfront.com) and Betterment (http://betterment.com) do year-round tax-loss harvesting for lower fees.

2. Make your contributions and distributions

While contributions to an Individual Retirement Account can wait until April 15, many other tax deductible items such as college savings 529 plans, charitable giving and gifting have year-end deadlines.

Most important, if you are over 70-1/2 you must take Required Minimum Distributions from your IRA account by Dec. 31; otherwise, you will be penalized by the Internal Revenue Service. "We like to try to get it done in first quarter, and then check it before the end of the year," Power said.

His firm tracks down clients who like to wait until the last minute, he noted.

3. Structure your giving

At Demming, one popular staffer jokingly called Mrs. Santa Claus is in charge of printing gift cards for eye-popping amounts for clients. The IRS allows you to give up to $14,000 to as many individuals as you like, without those gifts counting against your $5 million lifetime exemption.

"They are really popular under the tree," Demming said.

At The Gardner Group in Dallas, about a quarter of the clients have investment accounts designated for charity. Donations can be counted for a tax deduction in the year they are deposited and then dispersed at another time. Most are what President Greg Gardner calls "round-trippers" who zero out their accounts at the end of each year, but some have accumulated funds in the millions.

Gardner applies tax-loss harvesting strategies to these donor-advised fund accounts. When portfolios have capital gains, he sometimes advises clients to donate appreciated stocks.

4. Update your financial plan

Year-end is also a good time to make sure you are on track. At Ulin & Co Wealth Management, an LPL Financial-affiliated firm in Boca Raton, Florida, that means meeting with a lot of snow birds as soon as they touch down in the Sunshine State.

"They want to review old insurance, estate planning, refinancing houses. They have lists of things on a piece of paper. They will pick your brain on everything," founder and Managing Principal Jon Ulin said.

(Editing by Lauren Young and Richard Chang)

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