Take care of the basics

While you should always have your estate planning documents in place, these uncertain times make it that much more important.  Review and update your health care proxy and living will to make sure you have the right person designated to make medical decisions for you.  Review your power of attorney to ensure your agent can make financial decisions should the need arise.  Review your current Will or your revocable trust to make sure that disposition of your assets still meets your wishes.  Depending how your assets are titled, not all of them might pass under your Will or your revocable trust.  Do not forget to review beneficiary designations on your accounts, pension plans or IRAs, and life insurance policies, as well as the title of your other assets.

Take an extra step to make sure your planning works for you now 

All aspects of business and personal life have been impacted.  Courts are not an exception.  If you have a revocable trust in place as your main testamentary document, consider funding it now to ensure continuing management of assets in the event of your incapacity or death.  A properly funded revocable trust can also help eliminate the need to probate your Will, or mitigate the impact of possible delays of the probate process when the probate courts are not operating at their full capacities.

The slowing economy might also make it necessary to navigate the additional risks for business owners.  Review your planning with your advisers to explore your exposure to creditor claims and possible solutions to reduce those risks.

Changing economy and volatile markets allow for planning opportunities

Historically low interest rates offer great opportunities for wealth planning. Intra-family loans are a great way to help the younger generation which might be especially vulnerable in this economy.  Similarly, selling assets to a trust for a promissory note can maximize funding and future growth for the next generation without using estate and gift tax exemption.

Volatility of the market can also enhance traditional gift planning techniques.  Consider making annual exclusion amount gifts using publicly traded stock trading at a lower value in lieu of cash.  Income tax considerations, however, should be taken into account when using this strategy because the beneficiary will retain the donor’s basis for purposes of computing the capital gain upon sale.

A particularly effective technique in the low interest environment in combination with a depressed market is a grantor retained annuity trust (“GRAT”).  The GRAT is structured by you, the grantor, transferring assets into an irrevocable trust.  The trust, in turn, pays you an annuity interest for a term of years.  In order to minimize the amount of the gift by you to the trust, your annuity interest would be equivalent to the value of the assets you contributed plus interest.  If the GRAT’s investments perform at a higher rate of return than the required interest rate at the time the GRAT is established, the assets remaining in the trust after you receive your annuity pass free of gift and estate tax to the remainder beneficiaries of the trust.

You are staying home.  What about the logistics?

Understanding the need for business transactions to continue and for individuals to conduct their personal affairs, in light of the large scale stay-at-home measures, many states now allow for virtual witnessing of Wills and notarization of documents using video technology.  Our attorneys are available to review, discuss, prepare documents and assist in implementing your planning.

If you have any questions about this blog, please contact your SGR Private Wealth counsel.