Create a December Letter to Clients: Checklist for Year-End Planning

Dec 4, 2020 / By Charles Sherry, MSc
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To wrap up the year, share a letter with clients that includes nine tax tips for 2020, nine year-end-planning points, and a round-up on how the markets fared in November, all outlined in this template.

Horsesmouth has been offering client-letter templates since 2008. To help you easily customize these letters for your clients, we offer these guidelines for editing and using them. Quick-start tips are below, and you’ll find “Your Client Letter Template Kit,” our complete guide for creating client letters or articles from the templates, in the Resources box below at right.

You can click here to download a Word file of this month’s letter template, which is also shown below for your convenient review.


Your Client Letter Template Kit
Here’s a step-by-step guide to quickly send your clients a compelling, informative, and personal letter—monthly or quarterly.

Client Letter for November: The 2020 Vote and Your Finances
Address client anxiety over the election and what it means for their investments with this customizable client letter template. Plus, remind them about key end-of-year financial planning moves.

Client Letter for October: 6 Steps That Put You on the Path to a Successful Retirement
Share important tips that help put clients on a solid financial footing in retirement, along with commentary on September’s market pullback and speculation over how election results could affect financial markets. It’s all in this month’s customizable client-letter template.

Quick-start editing guide

If you want to use this template as the basis for your own monthly letter to clients, here’s what to do:

  1. Download the Word file.
  2. Save-as using a new file name (so you will still have the original as a backup).
  3. Print the full article from the Word file and complete steps 4 through 6 on paper.
  4. Line-through parts you want to delete.
  5. Note where you want to add or rewrite content.
  6. Note any changes to headlines or subheads.
  7. Open your copy of the Word file (not the original). Using the printed version as reference, delete content first. Then add or rewrite content. Edit headlines and subheads last.
  8. Print out the edited version and proofread it for any typographical errors.

A December Letter to Clients: Checklist for Year-End Planning and Market Round-Up

Our year-end checklist has proved to be very popular, and we are running it again with updates and modifications.

December’s letter is broken into three parts: tax planning, investment and financial planning, and a market wrap-up. If you create a comprehensive newsletter for clients, you may present as three separate articles. Or, you may present, change, supplement, or modify as you see fit.

Looking to year end

I know it’s a busy time. But it’s not too soon to start thinking about taxes. In prior conversations, we have discussed year-end planning. But let’s concentrate on taxes before the new year begins.

Many questions about the new administration have come my way, including questions about new tax proposals. Joe Biden’s plan is aggressive, but it may not get out of the starting gate if the Republicans hold the Senate. As you know, two early January runoffs will determine the fate of the upper chamber.

However, there is bipartisan support for what might be called The SECURE Act 2.0. Recall that the SECURE Act, which recently passed Congress, updated rules and regulations governing retirement accounts.

There are plenty of tweaks that we might see. For example, might RMDs for IRAs rise to 75? Could we see bigger catch-up provisions? Or greater flexibility for individuals 60 and older who are attempting to save for retirement?

Maybe, but let’s not jump too far into the future. Any possible changes are in the planning stage. Congress is more likely to focus on Covid relief early next year. Besides, comprehensive bills take time to wind through Congress. Instead, let’s focus on tying up loose ends as the year comes to a close.

Before we jump into year-end planning, I want to stress to you that it’s my job to partner with you. I can’t overemphasize this, and I would be happy to review your options. As with any tax matters, feel free to consult with your tax advisor.

9 tax facts and tips to save you money

  1. Tax brackets and tax rates have changed. Every year, the tax brackets for taxable income are adjusted based on the rate of inflation. Table 1 illustrates your marginal tax bracket based on taxable income.

    Table 1: Tax Brackets for 2020
    Rate Single individuals Married individuals filing joint returns Head of household
    10% Up to $9,875 Up to $19,750 Up to $14,100
    12% $9,876–$40,125 $19,751–$80,250 $14,101–$53,700
    22% $40,126–$85,525 $80,251–$171,050 $53,701–$85,500
    24% $85,526–$163,300 $171,051–$326,600 $85,501–$163,300
    32% $163,301–$207,350 $326,601–$414,700 $163,301–$207,350
    35% $207,351–$518,400 $414,701–$622,050 $207,351–$518,400
    37% $518,401 or more $622,051 or more $518,401 or more

    Source: Tax Foundation, IRS

  2. The increased standard deduction has simplified filing for many. The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from last year.

    For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400, up $200 from 2019. For heads of households, the standard deduction will increase to $18,650, up $300.

    The personal exemption for tax year 2020 remains at 0, as it was for 2019. The elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act. (IRS)

  3. You may be eligible to take a $2,000 tax credit for each child. The credit is available to parents as long as your child is younger than 17 years of age on the last day of the tax year, generally December 31. It begins to phase out at $200,000 of modified adjusted gross income for single filers. The amount doubles to $400,000 for married couples filing jointly.

  4. Limitations on itemized deductions. If cash expenses that are eligible to be itemized fail to top the standard deduction, skip Schedule A and take the standard deduction. It’s that simple.

    If you itemize, please be aware that state and local income taxes, property taxes, and real estate taxes are capped at $10,000. Anything above cannot be written off against income.

    However, the IRS said it will grant a workaround for some taxpayers.

    Taxpayers that use pass-through entities (PTE), including S-corporations, some limited liability companies, and partnerships may qualify depending on your state. This workaround is not available for sole proprietors and single-member LLCs.

    According to the American Institute of CPAs, the PTE may deduct the entity’s state and local income taxes as a tax on the business at the federal level and avoid the $10,000 cap.

    State proposals would also provide that the owner may claim a credit on the owner’s state income tax return for the owner’s distributive share of the taxes paid by the PTE.

    It’s a complex maneuver that is only allowed by a few states (NOTE: please see articles above, which list states that are included), but it can help reduce your tax liability if you qualify.

    For charitable contributions, you may generally deduct up to 50% of your adjusted gross income, but 20% and 30% limitations apply in some cases. (IRS)

    In 2020, the IRS allows all taxpayers to deduct the total qualified unreimbursed medical care expenses for the year that exceeds 7.5% of their adjusted gross income.

  5. Penalties have been eliminated for not maintaining minimum essential health care coverage, according to the Tax Cuts and Jobs Act.

  6. Estates of decedents who die during 2020 have a basic exclusion amount of $11,580,000, up from $11,400,000 for estates of decedents who died in 2019.

    The annual exclusion for gifts is $15,000 for calendar year 2020, as it was in 2019.

  7. The maximum credit allowed for adoptions for tax year 2020 is the amount of qualified adoption expenses up to $14,300, up from $14,080 for 2019.

  8. Changes to the AMT—the alternative minimum tax. Tax reform failed to do away with the alternative minimum tax (AMT), but it snags far fewer people.

    The AMT exemption amount for tax year 2020 is $72,900 and begins to phase out at $518,400 ($113,400 for married couples filing jointly for whom the exemption begins to phase out at $1,036,800).

    The 2019 exemption amount was $71,700 and began to phase out at $510,300 ($111,700, for married couples filing jointly for whom the exemption began to phase out at $1,020,600).

    It’s confusing, but most tax software programs run both calculations for you.

  9. There is a 20% deduction for business owners. The new law gives “flow-through” business owners, such as sole proprietorships, LLCs, partnerships, and S-corps, a 20% deduction on income earned by the business.

    This is a very valuable benefit to business owners who aren’t classified as C-corps and can’t benefit from 2018’s reduction in the corporate tax rate to 21% from 35%.

    Individual taxpayers and some trusts and estates may be entitled to a deduction of up to 20% of their net qualified business income (QBI) from a trade or business, including income from a pass-through entity.

    In general, total taxable income in 2020 must be under $163,300 for single filers or $326,600 for joint filers to qualify.

    The deduction does not reduce earnings subject to the self-employment tax.

    There are limitations to the new deduction and some aspects are complex. Feel free to check with your tax advisor to see how you may qualify. Most tax software programs will run the calculation, too.

The points above are simply a summary. You may see provisions that will benefit you. You may also see potential pitfalls. If you have any questions or concerns, let’s have a conversation.

9 smart planning moves to consider

  1. Review your income or portfolio strategy. Are you reaching a milestone in your life such as retirement or a change in your personal circumstances? Has your tolerance for taking risk changed? We experienced historic volatility this year. The broad-based S&P 500 Index lost over 30% in one month. The sell-off was steep and violent but short-lived.

    As November came to close, the major market indexes had recaptured prior highs. It’s a testament to adhering to the long-term financial plan.

    Did you take volatility in stride, or feel any uneasiness? A pandemic, a shuttering of the economy, and a swiftly falling stock market are bound to create some anxieties. But if you experienced sleepless nights or sought the safety of cash, now may be the time to re-evaluate risk and your approach.

    One of my goals has always been to remove the emotional component from the investment plan. You know, the one that encourages investors to load up on stocks when the market is soaring or one that prods us to sell when volatility surfaces.

    The hard data and my own personal experience tell me that the shortest distance between an investor and his/her financial goals is adherence to a well-diversified holistic financial plan.

  2. Rebalancing your portfolio. Despite the rollercoaster ride, overall market performance has been good this year. U.S. equities have provided a nice lift to your portfolio, but you may have too much exposure to stocks as we approach 2021.

    If that’s the case, we may need to trim back on equity exposure. However, we may want to wait until January in non-retirement accounts so that any gains are booked in tax year 2021.

  3. Take stock of changes in your life and review insurance and beneficiaries. Let’s be sure you are adequately covered. At the same time, it’s a good idea to update beneficiaries if the need has arisen.

  4. Tax loss deadline. You have until December 31 to harvest any tax losses and/or offset any capital gains. It may be advantageous to time sales in order to maximize tax benefits this year or next. We may also want to book gains and offset with any losses.

    But be aware that short- and long-term capital gains are taxed at different rates, and don’t run up against the wash-sale rule (IRS Publication 550) that could disallow a capital loss.

    A wash sale occurs when you sell a security at a loss and then purchase that same security or “substantially identical” securities within 30 days, either before or after the sale date (See Schwab: “A Primer on Wash Sales”)

  5. Mutual funds and taxable distributions. This is best described using an example.

    If you buy a mutual fund on December 15 and it pays its annual dividend and capital gain on December 18, you will be responsible for paying taxes on the entire yearly distribution, even though you held the fund for just three days.

    It’s a tax sting that’s best avoided because the net asset value hasn’t changed. It’s usually a good idea to wait until after the annual distribution to make the purchase.

  6. Required minimum distributions (RMDs) are minimum amounts the owner of most retirement accounts must withdraw annually.

    Please note that the CARES Act eliminated the RMD requirement in 2020. But let’s go through RMD requirements at a high level.

    The SECURE Act made major changes to RMD rules. If you reach age 70½ in 2020 or later you must take your first RMD by April 1 of the year after you reach 72 (IRS: Retirement Plan and IRA Required Minimum Distributions FAQs). Some plans may provide exceptions if you are still working (IRA FAQs: Required Minimum Distributions).

    If you reached the age of 70½ in 2019 the prior rule applies.

    For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31.

    While delaying the RMD until April 1 can cut your tax bite in the current year, please be aware that you’ll have two RMDs in the following year, which could bump you into a higher tax bracket.

    The RMD rules apply to all employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs.

    They do not apply to Roth IRAs.

    Don’t miss the deadline or you could be subject to a steep penalty.

  7. Contribute to a Roth IRA or traditional IRA. A Roth gives you the potential to earn tax-free growth (not just deferred tax-free growth) and allows for federal tax-free withdrawals if certain requirements are met.

    You may also be eligible to contribute to a traditional IRA. Contributions may be fully or partially deductible, depending on your income and circumstances. Total contributions for both accounts cannot exceed the prescribed limit.

    There are income limits, but if you qualify, the annual contribution limit for 2019, 2020, and 2021 is $6,000, or $7,000 if you’re age 50 or older.

    You can contribute if you (or your spouse if filing jointly) have taxable compensation.

    For 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs.

    For 2019, if you’re 70½ or older, you can’t make a regular contribution to a traditional IRA. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age (IRS: Retirement Topics-IRA Contribution Limits).

    You can make 2020 IRA contributions until April 15, 2021 (Note: statewide holidays can impact final date).

  8. College savings. A limited option called the Coverdell Education Savings Account (ESA) allows for a maximum contribution of $2,000. It must be made before the beneficiary turns 18. Contributions are not tax deductible.

    Distributions are tax free if used for qualified education expenses. But beware of income limits (IRS: Coverdell Education Savings Accounts).

    Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual’s modified adjusted gross income for the year is less than $110,000. For individuals filing joint returns, that amount is $220,000.

    A 529 plan allows for much higher contribution limits, and earnings are not subject to federal tax when used for the qualified education expenses of the designated beneficiary.

    As with the Coverdell ESA, contributions are not tax deductible.

  9. Charitable giving. Whether it is cash, stocks or bonds, you can donate to your favorite charity by December 31, potentially offsetting any income.

    Did you know that you may qualify for what’s called a “qualified charitable distribution (QCD)” if you are over 70½ years old?

    A QCD is an otherwise taxable distribution from an IRA or inherited IRA that is paid directly from the IRA to a qualified charity [Fidelity: “Donating to a charity using a qualified charitable distribution (QCD)”].

    A QCD may be counted toward your RMD, up to $100,000. If you file jointly, you and your spouse can make a $100,000 QCD from your own IRAs. This becomes even more valuable in light of tax reform as the higher standard deduction may preclude you from itemizing.

    You might also consider a donor-advised fund. Once the donation is made, you can generally realize immediate tax benefits, but it is up to the donor when the distribution to a qualified charity may be made.

I trust you’ve found these planning tips to be helpful. Please feel free to reach out if you have any questions, or check in with your tax advisor.

Cruising at 30,000 feet

November was a standout month for stocks, as illustrated by Table 2. The major U.S. stock market indexes recorded new highs, including the smaller-company Russell 2000 Index, which had a stellar month.

Table 2: Key Index Returns
Index MTD% YTD %
Dow Jones Industrial Average 11.8 3.9
Nasdaq Composite 11.8 36.0
S&P 500 Index 10.8 12.1
Russell 2000 Index 18.3 9.1
MSCI World ex-U.S.A* 15.2 0.7
MSCI Emerging Markets* 9.2 8.1
Bloomberg Barclays U.S. Aggregate Bond TR 1.0 7.4

Source: Wall Street Journal,, Morningstar, MarketWatch
MTD returns: Oct 30, 2020–Nov 30, 2020&
YTD returns: Dec 31, 2019–Nov 30, 2020

In particular, the better-known Dow Jones Industrial Average eclipsed 30,000 for the first time ever. It has been an impressive rally from March’s low, when the economy was locked down, unemployment was soaring, and the economy was contracting at its fastest rate in history.

The DJIA was published in 1896, according to the Library of Congress Business References.

The index first topped 100 in 1906, reached 1,000 by 1972, 10,000 by 1999, and 20,000 by 2017, according to LPL Research and data from the St. Louis Federal Reserve.

Landmarks have come at a faster pace given that the percentage gain to reach the next key marker declines. No one knows when we might hit 40,000, but a 33% advance is what’s needed to push the Dow to the next milestone.

In a broader context, what does this tell us? Stocks have a long-term upward bias, which is a piece of the well-diversified plan we recommend for you.

History repeats itself

Of course, markets don’t climb in a straight line. Volatility is inevitable. That goes without saying. March’s decline was short, but violent.

However, as we’ve repeatedly witnessed, market corrections and bear markets eventually come to an end, and major market indexes climb to new highs.

Catalysts during November

A bitter election is over. We have a new President. Whether you are jubilant, bitterly disappointed, or somewhere in between, a big unknown has been erased.

Talk of civil strife pre-election didn’t materialize. We have a degree of certainty where uncertainty once existed. The election removed a hurdle for investors, and the prospect we may have divided government also cheered investors.

In addition, the announcement of at least two vaccines for Covid-19 received a very warm welcome from investors.

Let’s back up a moment. So far, the economic recovery has been far more robust than nearly every economist has anticipated. Yet, problems remain.

With new vaccines, beaten-down sectors such as leisure, hospitality, travel, and the broad-based service sector have a fighting chance to recover next year. But success is dependent on approval of the vaccines, and acceptance and a quick rollout to the public.

Though we may see more volatility, the straightest line to your financial goals hasn’t changed. The financial plan is still your roadmap forward.

I hope you’ve found this review to be educational and helpful. Once again, before making any decisions that may impact your taxes, please consult with your tax advisor.

Let me once again emphasize that it is my job to assist you. If you have any questions or would like to discuss any matters, please feel free to give me or any of my team members a call.

As always, I’m honored and humbled that you have given me the opportunity to serve as your financial advisor.

Charles Sherry, MSc, is a financial writer who is passionate about delving deep into the markets and leveraging communication to improve the client experience. He has almost 25 years of industry experience, including six years authoring the highly-rated Schwab Market Update. Charles is a writer and speaker who works primarily with financial advisors, providing timely content for newsletters, blogs and social media. The goal: bolster client engagement and increase advisor visibility. Learn more at or contact him at

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