Hello, thank you for tuning into today’s Emerald GEM, which stands for Get Educated in Minutes. I’m Alvina Lo, Chief Wealth Strategist for Wilmington Trust, and in today’s GEM I’m going to answer the question: What is a New Year Resolution for a Healthy Wealth Plan?
It’s 2025 and Happy New Year! The start of a new year is the perfect opportunity to reflect, reassess, and make resolutions. While many resolutions focus on health and personal improvement, I encourage you to prioritize your financial health. Make it your New Year resolution to update your wealth plan. Ensuring your wealth plan is in order is one of the most impactful ways to set yourself up for financial success and peace of mind.
Now, before we dive in, let’s start with two important pre-requisites:
First, evaluate your current financial situation. This involves reviewing your income, expenses, debts, and investments. Only by understanding where you stand financially can you then identify areas of improvement and set realistic goals for the years ahead. Use this assessment as a foundation for updating your wealth plan.
Second, set clear financial goals for the short term and long term. Whether you’re saving for a significant expense, planning for retirement, or building an emergency fund, having specific and actionable goals is essential for financial success. Make sure your goals are aligned with your broader financial priorities and values.
Now that we know where we are and where we want go, let’s talk about the six steps that will help get us there, to ensure a healthy wealth plan:
1. Update Your Financial Plan
Did you experience any changes in your life this last year that might affect your financial situation? Perhaps you got a new job, moved to a new home, started a business or maybe sold a business, or experienced changes in your investment portfolio. Perhaps you own outlook and expectations changed? Maybe you’re planning to retire earlier or feel differently now about our economy. With the presidential election behind us, many people are reassessing their financial plans and their portfolio. This is now a good time to review all that in the context of your wealth plan for the year and beyond.
2. Update Your Will and Confirm Fiduciary Choices
Ask yourself, is your Will up to date? Does it reflect your current wishes regarding who will receive your assets and how? Are the individuals or institutions that you’ve named as executor or trustee still the right choice? Perhaps after the holidays, when you recently spent time with family and friends, you have a renewed sense of priorities and the relationships that matter, so you want to make sure that the provisions in your Will are aligned with your current wishes. And, if you haven’t reviewed your Will in years, now is the time to do so, because in my experience, even the most financially successful clients often neglect this critical part.
3. Update Your Ancillary Documents
In addition to your Will, there are what I’ll call “ancillary estate planning documents” that form your basic estate plan. Thes include your power of attorney, health care proxy, and living will. These documents are just as important as your Will. So ask yourself, have there been changes in the people you trust to act on your behalf? Have your loved ones moved away or have grown part so that it’s practically now less ideal to have them named in these documents? Having the right individuals who are ready, willing, and able to step in is incredibly important. Make sure you review these documents to ensure they’re up to date and reflect your current circumstances.
4. Proper Titling of Assets and Confirm Beneficiary Designations
A well-written Will won’t achieve all its purpose if it’s not correlated with how your assets are titled. Are your accounts held individually, jointly, or in a trust? Does this align with your overall plan? Assets titling needs to be reviewed in the context of the overall estate plan in order to ensure that the plan is maximizing the planning opportunities and minimizing confusions and complications. Additionally, for non-probate assets that pass outside of your Will, such as retirement accounts and life insurance policies, it’s critical to ensure that your beneficiary designations are correct. Have there been additions to your family, like a new child or grandchild, perhaps? Remember, updating your Will doesn’t automatically update these beneficiary designations. It is best practice to review and confirm them annually.
5. Re-Evaluate Life Insurance Needs
Another item that should be reviewed annually is your insurance coverage, be it your life insurance, property and casualty, or home insurance policies. Do you have the right type of policy? If so, is the coverage amount sufficient? If there’s an investment component to your policies, are they performing as expected? If your policy is held in a trust, are the trustees fulfilling their responsibilities properly? Risk assessment is a crucial part of a comprehensive wealth plan, so take this opportunity to reassess your needs and ensure that you’re well covered.
6. Be Attuned to Pending Changes in Tax Laws
2025 is going to be an interesting year in terms of potential tax law changes. Many of the tax cut provisions of the 2017 Tax Cuts and Jobs Act will automatically sunset or expire at the end of this year. While there are many provisions that are of note, the two we’re paying closest attention to because it has the largest impact on our wealth management clients, are: Ordinary income tax rate and Estate and gift tax exemption. On the ordinary income tax rate, the current top rate is 37%, which could potentially increase to 39.6% if the Tax Cuts and Jobs Act provision is left to be expired. On estate and gift tax exemption – the current exclusion amount is $13.99 million per individual (or double that to $27.98 million for a married couple), which by the way, is the highest it’s been in United States history. This would drop to nearly half, so the opportunity for the wealthy to engage in planning to pass on wealth, could be significantly reduced by the end of this year.
Now, all eyes will be on Washington to see whether these provisions will be made permanent, be extended or simply allowed to be expired.
And of course, we here at Wilmington Trust will be sure to keep a close watch throughout the year and share with you any likely changes, and, more importantly, how those changes may impact your plan.
Actionable advice leads to proactive planning. So, if you get a head start now and make it part of your new year resolution, you can stay ahead of any potential changes and ensure your wealth plan is up to date, so you can set yourself up for a healthy and robust financial future.
Thank you for joining us today. Please contact your Wilmington Trust advisor if you have any questions about: What is a New Resolution for a Healthy Wealth Plan? We would be glad to help you. See you next time!
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