The COVID-19 pandemic has led to dramatic fluctuations in the stock market and the value of closely held businesses.  Although we all hope that the massive dips in values are temporary, these challenges present unique opportunities for individuals who would be subject to federal or state estate taxes.  Lower values allow more assets to be moved out of your estate while using less of your available gift and estate tax exemption amounts.

Estate planning strategies to consider implementing during this time:

  • Make gifts to Irrevocable Trusts using depressed values of assets.  These Irrevocable Trusts can be Spousal Lifetime Access Trusts (SLATs) that allow your spouse to control and have access to the assets in the trust.
  • For those who already have created SLATs and used their full gift tax exemption, sell assets for current FMV to the trust in return for a promissory note using current low applicable federal rates (AFR).  If using closely held business interests, discounts may also be available.
  • Create and fund Grantor Retained Annuity Trusts (GRATs).  GRATs are ideal estate planning vehicles at times of low interest rates and for assets that are likely to appreciate significantly over time.  These trusts rely on the appreciation on the assets beating the growth the IRS presumes (based on current AFR).
  • If you currently have grantor trusts in place, consider swapping assets that have a currently depressed value for assets inside the trust that are more stable.  This allows the recovery in the currently depressed assets to occur outside of your estate.
  • Consider a Roth conversion for IRA assets, particularly in light of the changes to inherited retirement assets after the passage of the SECURE Act.

For more information or help making changes to your estate plan, please feel free to contact a member of Winthrop & Weinstine’s Trust and Estates team.