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A Dozen Reasons to Review Your Financial and Estate Plans

Sikich

Jun 18 2020

3 min read

In the face of volatile times and uncertainties caused by the COVID-19 pandemic, there are countless reasons to review and update your financial and estate plans now. From opportunities for favorable business valuations in the current economic environment to changes prompted by the SECURE Act, the following list covers several considerations that may merit a review of your financial and estate plans:

The current (but temporary) higher lifetime estate/gift tax exclusion and lower current valuations provide the opportunity to enhance wealth transfer in the near term. Ask yourself the following questions:
- Will Congress significantly decrease the federal lifetime exclusion?
- Does your state of domicile currently assess an estate or inheritance tax?
- With a higher lifetime exclusion, would it be prudent to “undo” certain moves intended to limit estate tax but which result in lost basis step-up?
- The estate funding formula may predate advent of higher lifetime exclusions and as such, possibly disinherit the surviving spouse.
In this current “down market,” opportunities may exist for tax-favorable valuations of businesses for the gifting or sale of interests to family members.
Historically low interest rates also provide the prospect for “leveraged” gifting (such as Grantor Retained Annuity Trusts (GRATs)), by enabling further reduction of the amount subject to gift tax.
The current low interest rate environment may warrant the revision of intra-family loans (but beware of potential income tax implications to the borrower).
Recent case law has created state tax savings opportunities with respect to trusts that accumulate income.
A stock market decline may prompt individuals to add life insurance as a hedge against diminished legacy. Alternatively, if policy performance (e.g. dividend history) has been positive, policy holders may be able to leverage their existing policy for another with greater death benefit (or lower premium, or both).
The original circumstances for acquiring life insurance may have changed, providing a reason to review the policy and tailor the policy holder’s insurance program to his/her current objectives.
Increased awareness of “Black Swan events” can prompt investors to review their asset allocation.
A stock market decline may justify review of the Roth IRA conversion strategy and present possibilities for more tax-efficient conversion.
The federal SECURE Act creates the need to review estate plans that designate certain trusts as the beneficiary of an IRA (e.g. the SECURE Act made changes to the determination of the annual required minimum distributions).
Business and investment losses may warrant a review of financial independence plans.
Severe economic downturns can stimulate consideration of asset protection strategies.

We encourage you to review your financial and estate plans during this uncertain time. For help updating your plans or establishing a plan, please contact our team.

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This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

About the Author

Sikich

Sikich is a global company specializing in technology-enabled professional services. With more than 1,900 employees, Sikich draws on a diverse portfolio of technology solutions to deliver transformative digital strategies and is comprised of one of the largest CPA firms in the United States. From corporations and not-for-profits to state and local governments and federal agencies, Sikich clients utilize a broad spectrum of services* and products to help them improve performance and achieve long-term, strategic goals. *Securities offered through Sikich Corporate Finance LLC, member FINRA/SIPC. Investment advisory services offered through Sikich Financial, an SEC Registered Investment Advisor. 