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Authored by Randi Schuster and Rowland Smith

Recently, the COVID-19 pandemic has caused massive uncertainty in the market between the shifts in the stock market and potential legislative changes. However, while so much is uncertain, for those subject to federal and/or state estate tax, the current market conditions provide an excellent estate planning opportunity. While assets are (hopefully) temporarily depressed in value, more value can be transferred out of the estate with an increased likelihood of appreciation being passed to beneficiaries. 

Below are some estate and gift planning ideas to help you through this uncertain time.

  • Create and fund grantor retained annuity trusts (GRATs): with the decrease in asset values coupled with low interest rates, this statutory vehicle can be used to pass value to the next generation
  • Convert IRA to ROTH IRA: tax is paid on the value of the assets on the conversion, but then the assets continue to grow tax-free and all withdrawals are income-tax-free
  • Make outright gifts or gifts in trust with the currently depressed FMV of assets
  • Make or refinance loans, including intra-family loans: again, with interest rates being low, loans and sales of assets in exchange for notes are attractive estate-planning techniques
  • Remember use of discounts with gifts still applies: use partnerships or other type of entities for discounted giving
  • Harvest capital losses: talk to your financial advisors and prepare tax projections that would help you determine whether this is appropriate for your situation
  • Make transactions with grantor trusts: swap a depressed FMV asset into a trust removes the recovery in FMV outside a taxable estate
  • Make transactions with family or trusts: sales between less efficient and more efficient trusts may better position the assets and future appreciation
  • Create a charitable gift plan

Talk to your Baker Tilly advisor for more information and personalized advice regarding implementing these estate and gift planning tactics.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

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