Although markets go up and markets go down, many assets are indisputably worth less today than they were a few years ago. Whether your assets are stock market investments or real estate holdings, the economic slowdown has caused nearly all prices to fall. Might this be a boon for your estate planning objectives?
The Upside of Values Going Down
Each year, you are permitted to make an annual gift to any individual without concern for the gift tax. In 2009, that limit is $13,000. However, if you are of significant means and wish to pass to any one individual more than $13,000 each year, you have several gifting options.
In a down market, additional alternatives also become attractive. Since values have decreased, you can transfer assets (e.g., shares of stock, a vacation home) at relatively low prices. Say you have a stock or mutual fund that has lost 50% of its value but that you still believe in for the long-term. By gifting the asset now, you transfer all the upside potential to the gift recipient while minimizing your potential gift or estate tax.
Interest Rates Are Low
That interest rates are at historic lows also presents other sophisticated gift and estate planning implications best discussed with a competent attorney or financial advisor. Such techniques might include grantor retained annuity trusts or charitable lead trusts. Before investing time and money in that endeavor, however, make sure the dollars involved are great enough. You want to make sure you have plenty left for yourself. After all, those decreasing asset prices have probably trimmed your net worth significantly as well.
