To organize and carry out your household financial plan, you need to ensure finances are checked regularly and action is taken as needed.

“It’s easier to do these things in small bites. You don’t want to try and do a year’s worth of financial planning in one sitting. It can be too daunting, and then it never gets implemented,” says Geoffrey M. Zimmerman, CFP®, senior client advisor at Mosaic Financial Partners Inc.

Smart Business spoke with Zimmerman about executing personal financial planning.

What should a year of financial planning include?

January — Prepare a household net worth calculation that looks at all your assets against debts and liabilities. Compare last year’s statement to this year’s to see if you increased your household net worth. Also review your spending plan for the year as year-end reports become available.

Adjust your payroll elections to maximize contributions to employer retirement plans and/or executive top hat plans. For corporate executives, implement any exercise and hold strategies with incentive stock options.

February — Review your property and casualty insurance, such as homeowners and auto, especially if you made a major purchase last year. Your excess liability coverage needs to be adequate relative to both your current net worth and earnings potential.

March — Pull out old statements and clear out the deadwood. You’ll need to keep certain documents for tax purposes, like your cost basis on securities, but your advisers can suggest how long to retain documents.

It’s also time to look at your portfolio, and rebalance it if needed. According to Gobind Daryanani, in a 2008 Journal of Financial Planning article, if you look frequently and rebalance when an asset class has deviated from its target by 20 percent or more, you can pick up some additional returns.

April —Increase your Individual Retirement Account (IRA) contributions for the prior year before the tax-filing deadline. By funding your IRA now with $5,500 annually, $6,500 if you’re older than 50, funds are less prone to leak out of the ATM.

May — Update estate plan documents. Have there been changes affecting the people you have in place to act on your behalf? Were there changes in the tax laws, exemption amounts, your net worth or state of residence?

June — Time for a midyear review. Evaluate your placement of assets for tax efficiency, rebalance your portfolio and consider midyear tax loss harvesting in your after-tax accounts. If your non-IRA account has a security at a loss, you can sell it, take the loss and buy something similar but not identical. The losses can be used throughout the year or carried into the future.

July — Think about the future with your significant other, spouse or partner. Kick back, dream about what you and your family want, and jot down a few notes.

August — Check your Section 529 savings accounts for the kids and grandkids. If they aren’t set up yet, don’t wait; college isn’t getting cheaper. These plans allow contributions to be made to pay for post-high school education at a qualified institution, tax-free.

September — Pull out the notes on your future plans from July. Use it to update the financial plan, looking for necessary changes. Also, rebalance your portfolio.

October — With open enrollment, review employee benefit elections for medical, life, disability, vision, dental, etc. Also look at your outside insurance such as life and long-term care against current needs. Corporate executives with nonqualified deferred compensation plans need to elect salary deferral for the following year.

November — Begin year-end tax reviews to manage tax liability. It’s also a good time to finalize remaining charitable donations, including appreciated stock.

December — Do an end of year wrapup, such as annual gifting, financial portfolio rebalancing or tax-loss harvesting. IRA to Roth conversions must be done before Dec. 31. Also, go back to exercised incentive stock options and decide whether to do a disqualified position and sell that stock, or to hold it into the following year.  

Finally, take a look at this list and see how much you were able to complete this year. Were you able to do it all? Lift a cup of egg nog and celebrate. And, if you didn’t, then consider enlisting the help of a financial planner to help you stay on track.

Geoffrey M. Zimmerman, CFP®, is a senior client advisor at Mosaic Financial Partners Inc. Reach him at (415) 788-1952 or

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.

Published in Northern California

Depending on your circumstances, year-end tax planning strategies can bring multi-year benefits.

“The end of the year is a great time to review for tax planning opportunities because most of the income items for the year are known,” says Geoffrey M. Zimmerman, CFP®, senior client advisor at Mosaic Financial Partners, Inc.

Smart Business spoke with Zimmerman about some tax planning items to consider.

How can big year/little year planning help?

If your income varies significantly from year to year, look for ways to decrease income in the big income year and increase income in the small income year.   Corporate executives with stock options have flexibility as to when they recognize this income. Employees with access to nonqualified deferred compensation (NQDC) plans have opportunities to defer some annual income.

For the charitably minded, a big income year offers opportunities to leverage the use of a donor-advised fund: A larger-than-normal charitable donation is made to the fund in the high-income year when the itemized deduction has more tax benefit, and then funds are disbursed to your preferred charities over multiple, lower-income years. Charitably minded investors over age 70 ½ with IRAs should consider making some charitable donations directly from their IRA.

Households with unusually low income in 2013 may benefit from accelerating income by exercising stock options, or via a partial conversion from an IRA to a Roth IRA. Once in a Roth IRA, the converted amount plus any growth is generally tax free, and is not subject to minimum distribution requirements. This is a powerful planning tool for managing future income tax liability and preserving wealth across generations.

What’s important to know about alternative minimum tax (AMT) planning?

Households in the early stages of AMT should explore strategies involving timing of itemized deductions, particularly AMT preference items like property tax and state income tax payments.  
Households that are deep into AMT have some significant opportunities beginning at the point where Alternative Minimum Taxable Income (AMTI) exceeds approximately $480,000 up until the point where ordinary tax exceeds AMT. In this range, the top marginal tax rate is 28 percent, not 39.6 percent. The opportunity involves increasing income — via exercise of stock options, IRA to Roth conversions, or other means — if such income would otherwise be taxed at a higher rate in the future.

As a starting point, couples with taxable income between roughly $500,000 and $1.2 million — particularly those with large amounts of preference items — should take a close look here.

What else should executives know about stock options?

Incentive stock option (ISO) strategies deserve a close look at the end of the year. If you have ISOs and are not in AMT, consider exercising ISOs up to the point of triggering AMT. If you’ve exercised ISOs during the year then you need to review your ability to meet the qualifying holding periods and the cost of paying AMT.

The AMT event is locked in on Dec. 31, so year-end planning is crucial to avoid the risk of paying AMT in the current year and ordinary tax the following year if the qualifying holding period isn’t met.

How can executives use NQDC plans?

An NQDC plan allows participants to defer a portion of their income to a future date. Salary deferrals typically may be invested and diversified, and distributions and taxation postponed until separation from service.

A tax-neutral planning strategy matches salary deferrals with stock option exercises of a like amount, moving dollars from a position with single stock risk and a distinct expiration date into a more diversified pool of funds with no explicit expiration date. NQDC plans do have risk because these plans are typically considered company assets until distribution occurs.

Geoffrey M. Zimmerman, CFP®, is a senior client advisor at Mosaic Financial Partners, Inc. 
Reach him at (415) 788-1952 or

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.

Published in Northern California

Estate planning is more than just having documents. It needs to be tied to long-term intent and aligned with your goals. What works for one person may not work well for the next, and what worked 10 years ago may not work now.

Geoffrey M. Zimmerman, CFP® practitioner, senior client advisor at Mosaic Financial Partners Inc., says many treat their estate plan like a transaction, even though the moving parts may have changed.

“They may have a document that is doing things to them and to their beneficiaries, and not really working well for them,” he says. “That’s why it’s important to review the plan periodically. It might take a visit to your attorney and the cost of several hours of time to update it. But in terms of relieving the headache on a surviving spouse or beneficiaries, those can be dollars well spent.”

Smart Business spoke with Zimmerman about why your estate plan should be continually adjusted.

What recent changes make updating your estate plan important?

Although the estate tax exemption did not reset as many feared, there are new items to consider. Undistributed income from an irrevocable trust can reach the top federal income tax bracket of 39.6 percent plus the Medicare tax of 3.8 percent after only $11,950. Those trusts can also see capital gains rates increase from 15 to 20 percent. This might impact a surviving spouse with capital gains assets in a credit shelter trust (also called a bypass trust) and assets in a marital trust.

How could outdated plans create problems?

In 1996, a couple with a $3 million estate would typically use a bypass trust to allow both spouses to use their respective $600,000 exemption to non-spouse beneficiaries, effectively allowing $1.2 million to pass to heirs free of estate tax. The remaining $1.8 million — plus any additional growth — was taxed at the death of the surviving spouse at rates up to 55 percent. A common planning strategy at the death of the first spouse was to put growth assets into the trust, as there would be no estate taxes on those assets. Heirs would still pay capital gains taxes, but capital gains taxes were (and still are) lower than estate taxes.

Today, the estate tax exemption has increased to $5.25 million per person. In our example above, the surviving spouse’s estate of $2.4 million worth of property could more than double before reaching $5.25 million and triggering any estate taxes.

Also, with the new laws, there is a now a new feature called ‘portability,’ which allows the surviving spouse to use the deceased spouse’s unused exemption amount. So in theory, a surviving spouse could pass up to $10.5 million worth of assets to heirs free of estate tax without using a bypass trust.

Older trusts that call for the creation and funding of a bypass trust may incur other unintended consequences. For example, formulas that call for funding the bypass trust to the maximum amount available without triggering an estate tax could leave the surviving spouse at a disadvantage with little or no assets in the survivors trust. Subtrusts that contain highly restrictive conditions for distributions to the survivor can create further complications. Finally, estates that contain large amounts of illiquid  assets that would need to be split between multiple trusts may also be problematic.  Periodic reviews, including a flowchart to understand what assets are going where, may be particularly helpful.

Also, as mentioned earlier, undistributed income in the bypass trust can hit top tax rates at very low levels of income, whereas the surviving spouse may not reach top tax brackets until he or she reaches $400,000 in taxable income.

Does this mean subtrusts are no longer useful?

They are still useful in cases where control over the disposition of assets is important, such as preventing a surviving spouse from disinheriting children from a previous marriage. You must balance the need for control against the surviving spouse’s needs, and your goals for your non-spouse beneficiaries. The surviving spouse and beneficiaries may have different interests — income versus growth. Proper planning, which includes a good understanding of goals and motivations, can help improve the odds of a successful outcome.

Geoffrey M. Zimmerman, CFP® practitioner, senior client advisor, at Mosaic Financial Partners Inc. Reach him at (415) 788-1952 or

Zimmerman, CFP® practitioner and senior client advisor for Mosaic Financial Partners Inc. serves affluent individuals and families. A complimentary consultation is available upon request.

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.


Published in Northern California