Jeff Levine: 7 End-of-Life Tax Planning Mistakes to Avoid

Kitces.com’s lead financial planning nerd Jeff Levine kicked off Holistiplan’s 2024 Tax Planning Summit last week with a presentation that underscored an important but easily overlooked lesson for financial advisors aiming to deliver added value to their clients via tax-aware planning.

As Levine explored during the event, it’s not always the most complicated tax mitigation techniques or the most time-sensitive tax strategies that result in the best outcomes for clients. Yes, advanced and highly tactical tax strategies have their place, but so do the plain old tax fundamentals, like understanding how asset gains and losses are treated in the year after a client’s death. It’s surprisingly easy for advisors to find themselves focusing too much on the former category and overlooking the latter, Levine says.

For example, many advisors may find themselves either asking or fielding questions about the pending sunset of the doubled estate tax exemption under the Tax Cuts and Jobs Act, which will shrink the estate tax exemption to about $6.8 million per person.

While this is potentially a big deal for some clients, Levine explained, the reality is that very few families in the U.S. actually have enough wealth on hand to make the sunset deadline at the end of 2025 mean a whole lot for their decision-making between now and the end of next year.

On the flip side, though, a reversion of the income tax brackets to prior lower levels — which is also set to occur starting in 2026 unless Congress acts to intervene — may be of far higher significance for the typical mass affluent or even high-net-worth client. So, it’s important for advisors to keep a balanced perspective and avoid letting the hot-button issues of the day cloud their long-term thinking about managing taxes.

To that end, see the gallery for a review of seven tax planning mistakes and misunderstandings that can trip up even the most conscientious advisors, especially when there are big questions in the air about the near-term future of big tax policies.