In unpredictable times, the desire to create a better tax strategy becomes more urgent, but that could result in some regrettable changes to perfectly good plans.
For example, many advisers counseled their wealthy clients in 2012 that the estate and gift taxes exemptions were going down and that the rates on those taxes were going up. But the opposite happened the next year, and people who had given away more than they might have otherwise were caught off guard.
This year, few respectable financial advisers are handicapping the election and what it might mean for taxes and investment returns next year. But that doesn’t mean they are not providing counsel.
“We can’t make predictions better than anyone else can,” said Ani C. Hovanessian, chair of the New York Tax and Wealth Planning Group at Venable, a law firm. “But if we fail to plan, we plan to fail. Individuals aren’t going to work with me because we’re frozen like a deer in the headlights.”
Here’s a look at different planning strategies that taxpayers may want to embrace, avoid or even hedge, all with an acknowledgment that no one knows what next year will bring.
WHAT TO DO
The main criterion for committing to a new plan now is that it is something you would have done eventually. Adjustments should not be something that springs to mind out of fear of the November election.
One easy change is converting an individual retirement account to a Roth retirement account. The money in a traditional I.R.A. is taxed when it is taken out. With a Roth I.R.A., you pay the