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Marianne D. Fishler: A good time to make sure planning is on track

The holiday season is upon us, which for many, means time spent with family and friends reflecting on the blessings in life and those we hold dear, and thinking ahead to the coming year. It is a good time to do a year end check-up to make sure that your financial plan is on track and ensure that your actions reflect your values.

Some things to think about as 2011 comes to a close:

Are you maximizing your IRA, 401(k) and/or 403(b) contributions? The 401(k) contribution limit for 2011 is $16,500 with a $5,500 catch-up provision if you are age 50 or older. Remember that these are IRS limits; your plan may have different limits — consult your plan administrator.

The holidays often make us feel more charitably inclined. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 can make giving this year a little more attractive for seniors. In 2011, owners of IRA accounts who are over 70½ years of age can make a charitable contribution to a qualified charity of up to $100,000 directly from their IRA up to December 31.

The amount contributed will not count as taxable income, and the contribution will not qualify as a deduction from income. The amount transferred may count as the minimum required distribution for tax year 2011. This opportunity ends after 2011, so check with your advisors to see if this strategy will work for you.

Have you taken full advantage of the annual gift tax exclusion amounts for 2011? Each taxpayer is allowed to gift $13,000 to any individual in 2011 without having to pay gift tax. For a married couple, the combined maximum gift is $26,000.

This is an excellent wealth transfer strategy, effectively reducing the net worth of the giver with potentially no tax consequences to themselves or the recipient. Given the state of the economy, a gift of cash may be particularly welcome this year.

Remember that if you are paying education expenses on behalf of someone else, that amount is outside of the annual exclusion amount. There is no limit on what you can pay for someone else’s education, as long as the payment goes directly to the educational institution. Check with your tax advisor to make sure you understand the tax impact of gifts you make.

Beware of the mutual fund tax trap as year-end approaches. Most mutual funds pay out the majority of their distributions (which are taxable unless owned in qualified retirement accounts) close to year end — some as early as November. The distributions are generally divided equally among all shareholders as of a certain date, and do not take into consideration how long each investor has owned the fund. Buying a fund close to this date at year end could throw you into the unfortunate situation of paying tax on a year’s worth of gains on a fund you only owned for a few days.

Check with your advisor — taxes should not be the only consideration in making a wise investment decision.

Marianne D. Fishler, CFP®, is president and co-founder of Baltimore-based Foundry Wealth Advisors LLC. Investment Advisory Services are offered through Donnelly Steen & Co. d/b/a Foundry Wealth Advisors, a US SEC Registered Investment Advisor, 1201 N. Orange St., Wilmington, Del. Securities are offered through Coastal Equities Inc., member FINRA/SPIC, 602 Main St., Cincinnati, Ohio. Foundry Wealth Advisors LLC is a separate company from Donnelly Steen & Co. and Coastal Equities Inc. Contact Marianne Fishler at marianne.fishler@foundrywealth.com or 443-692-8833.