The most important thing you can do long term to protect your finances right now is follow all state and federal orders and recommendations to stay healthy and safe and support the health and safety of others during the COVID-19 pandemic.
Once you have implemented the plan above, it’s time to focus on the health of your trust and estate planning. Here is a checklist to consider. Please call or email us to set up a virtual review with you of this checklist or other issues that may be on your mind.
- Update Beneficiaries, Power of Attorney and Durable Power of Attorney
Consider a review of your plan documents with your attorney to make sure your plan is aligned with current conditions.
- Wealth Transfer Considerations:
Low asset values and low interest rates may represent an opportunity for you. Now is a great time to discuss your unique circumstances. Here are some considerations:
- Direct Gifts: You may wish to consider the timely use of the wealth transfer option of making direct gifts of undervalued assets to your heirs or trusts for their benefit. The amount that one can transfer free of estate and gift tax during lifetime or at death is $11.58 million ($23.16 million for a couple). That will decrease in 2026. With lower asset values, it may be a good time to move forward with these plans.
- Refinancing of Promissory Notes: With interest rates at historic lows, you may be able to help your heirs retain more wealth over time if your heirs or trusts for their benefit owe you funds pursuant to a promissory note. Refinancing promissory notes can make it less expensive for your heirs/trusts for their benefit to repay you and help you retain more appreciation.
- Dynasty Trusts: The “swap power” in an irrevocable grantor trust can be a powerful and timely tool to make sure appreciating assets are held in the trust you have established for your heirs, and low-basis assets are held in your estate. We are happy to review these trusts with you.
- Grantor Retained Annuity Trusts (GRAT): Depressed asset values and lower interest rates may make a GRAT an attractive option for you. If you have one and it was recently created, you may wish to explore how to optimize for the change in asset value. You may want to create a new trust. If you haven’t established such a trust, it may present a good option in the current climate because of the low asset values and interest rates – so beneficiaries incur very low estate and gift tax costs. A GRAT works best when its assets appreciate over the course of the GRAT’s term.
Your attorney can help you decide which changes are needed to any estate planning documents or trusts you have. Contact Davis Miles McGuire Gardner to make sure you have the best and most current strategy for the future.