A Dozen Reasons to Review Your Financial and Estate Plans

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:

1. 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.
2. In this current “down market,” opportunities may exist for tax-favorable valuations of businesses for the gifting or sale of interests to family members.
3. 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.
4. The current low interest rate environment may warrant the revision of intra-family loans (but beware of potential income tax implications to the borrower).
5. Recent case law has created state tax savings opportunities with respect to trusts that accumulate income.
6. 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).
7. 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.
8. Increased awareness of “Black Swan events” can prompt investors to review their asset allocation.
9. A stock market decline may justify review of the Roth IRA conversion strategy and present possibilities for more tax-efficient conversion.
10. 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).
11. Business and investment losses may warrant a review of financial independence plans.
12. 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.