Tax Planning

Gloomy Skies Create a Perfect Storm for Wealth Transfer Opportunities

Our portfolios have taken a fairly serious hit in the first half of 2020. Not only has the stock market pulled back in response to the global pandemic, but it is plagued with volatility, which seems to coincide with all of the unpredictability we are experiencing these days.  

Moreover, the Congress has been forced to engage in some very aggressive monetary policy in response to the economic downturn resulting from the pandemic. While absolutely necessary to keep vulnerable Americans afloat, the significant fiscal measures put in place by the government have depressed interest rates and thus rendered discouraging yields on our investments.  

Interestingly, though, the gloomy skies these days have actually created a perfect storm for one particular type of estate planning – wealth transfer. Thus, in this blog, we will discuss a few ways in which the current economic climate makes it ideal for certain types of wealth transfer.

At Doane & Doane, PA, we are passionate about giving our clients the personalized legal counsel they need to appropriately take care of many major life and death decisions, whether it is estate planning or future child support.

So, to answer your estate planning questions, we welcome you to consider contacting us at Doane & Doane, PA for estate planning advice and services. You can contact us today at 561-656-0200 or fill out our online contact form.

What Has Created the Perfect Storm?

The current low-interest rates and the fact that asset prices have been reduced, combined with a very high estate tax exemption – due to the Tax Cuts and Jobs Act of 2018 – now allows people to maximize the amount of money that you are able to push over to your beneficiaries while minimizing your taxes, or avoid taxes altogether.  

Accordingly, if you were waiting for the right time to move securities or the interest into your own business or your own real estate, now is the right time. Why?  It is because with assets being lower in value, you can pass more assets out of your estate into a vehicle like an irrevocable trust, and still remain under the currently-very-high estate tax exemption.  

Let us take a look at that type of transaction in more detail.

Estate Appreciation Removal

Assume for the moment that you have some assets, like investments, that have lost value recently – we all can certainly point to stocks and other securities that took an impact in this year’s economy. Well, you put those assets into a trust for the parties involved, like your children and grandchildren.  

Then, when things finally start to recover, those assets will appreciate in value considerably. That trust then holds onto those significant gains, tax-free, which you can ultimately pass on to the parties involved, namely, your beneficiaries.  

Even if you are not looking to move a currently low stock portfolio into a trust, the very high estate tax at the present time means that you can simply transfer a higher volume of your estate and still stay under the exemption.

Some financial analysts say that this is kind of like going to the dentist. No one really wants to go and finds many ways to put it off. But, when there is an issue that makes you go, then you will ultimately make that appointment.

In the same manner, many times people keep putting off wealth transfers. Now, however, because the conditions are so favorable for such things, you would be very wise to handle those wealth transfers. That is because a time like this – low interest, high estate exemption – might not come around any time soon.

Use of a Short-Term GRAT

The tactic of moving devalued assets – like securities – into a trust, and then letting the securities appreciate in the trust, all for the benefit of your beneficiaries is an effective one. Yet, you may get a little squeamish about locking those assets into a rigid, hard to amend, an irrevocable trust. Then there are GRATs to the rescue – Grantor Retained Annuity Trusts.

Why are GRATs so great? It is a way that you can still leave the appreciation of your assets to your heirs but get back the value of your assets during your lifetime.  

Short-term GRATs could be as short as two years. Today’s climate is perfect for that.  You know that with the depressed prices, there will be a short-term appreciation in your portfolio. So, if the assets are in a short-term GRAT, then the trust will hold onto the short-term upswing in the assets value, and you then get back after two years the asset itself. The goal with GRATs is to outlive the term of the GRAT. And, you can use a little trial and error here.  Short-term GRATs are good for that. Some GRATs will see a lot of appreciation, others will not. But, there is no penalty for a failed GRAT, so you get ‘em next time.

The key is for the parties involved to get the help of an experienced estate planning attorney.

Look to Doane & Doane for Help with Estate Planning Options

Founded in 2003 by husband and wife legal team, Randell C. Doane and Rebecca G. Doane, Doane & Doane provides legal and financial services to families, individuals, and businesses throughout Southeast Florida.

Estate planning is about much more than just giving away property. It is an act of love and kindness, with the ultimate goal of providing for the future financial security of your loved one. At Doane & Doane, our Wills and Trusts Attorneys West Palm Beach help people plan for retirement, make provisions for loved ones, figure out future child support, and minimize tax liability. Experienced wills and trusts attorneys know which tools to use to get the best results for their clients. Our lawyers can help you determine which tools are best suited to your specific circumstances.

When it comes to probate matters, such as the formal administration of an estate, Florida fiduciaries seek the assistance of the attorneys at Doane & Doane, P.A. to administer and manage their trusts and estates. Notably, the founding partners of Doane & Doane are board certified West Palm Beach Probate Attorneys. With the additional advantage of certified public accountancy in their backgrounds, they present a unique combination of skills and experience which enables them to effectively settle, administer, and manage clients’ trusts and estates.

Call us at Doane & Doane, P.A., to help you if you are faced with a probate matter, or if you would like estate planning services in Florida. You can reach us at 561-656-0200. Call us today.