Estate Planning and Valuation During an Uncertain Economy – and an Election Year

Schneider Downs has published a number of articles in recent months discussing valuation and estate planning strategies during this difficult economic time (links are included at the bottom), but now these strategies are even more relevant as the upcoming election could significantly impact future estate tax laws.

If there is any bright side to an economic downturn, it may be that ‘less is more’ when it comes to planning your estate. Generally, the less assets remaining in your estate upon death, the lower its tax burden. To minimize the size of an estate, an individual can make gifts during their lifetime by taking advantage of the lifetime gift tax exemption, currently $11.58 million per person, and the annual gift tax exclusion of $15,000 per donee.

During an economic downturn, investment values, including ownership interests in private and public companies, often become depressed. One receives the added benefit of gifting such assets while they have declined in value since a larger piece of their would-be estate may be gifted while still remaining below the lifetime exemption and annual exclusion limits. The donor will have reduced their estate tax burden, while the donee receives assets that will potentially increase in value when the economy recovers – a win-win situation.

It is unclear how lifetime exemption and annual exclusion amounts will change, if at all, after the November election. The Tax Cuts and Jobs Act passed by President Trump in 2017 doubled the gift tax lifetime exemption to its current level and sunsets on December 31, 2025. Many predict the estate tax exemption would be reduced if former Vice President Joe Biden were to take office, but the magnitude of that reduction is not certain.  Therefore, it would be beneficial to take advantage of the exemption at its current level before it is potentially reduced.

To be sure, the future of the current estate tax environment is uncertain, and the values of many investments have decreased as a result of volatile market conditions, so this may be an ideal time to discuss your estate planning strategy with your financial/tax advisor.

Schneider Downs has significant experience providing estate planning consulting.  We have also prepared numerous valuations for gift and estate tax purposes.  Contact Greg Allison (412-697-5341; [email protected]) or Melanie LaSota (412-697-5242; [email protected]) for more information about our estate planning services and Steve Thimons (412-697-5281; [email protected] if you have questions regarding valuation services.

Sources:

https://www.schneiderdowns.com/our-thoughts-on/use-it-or-lose-it

https://www.schneiderdowns.com/our-thoughts-on/current-market-conditions-valuations-estate-planning

https://www.schneiderdowns.com/our-thoughts-on/estate-planning-tool-business-succession-plan

https://www.schneiderdowns.com/our-thoughts-on/decipher-estate-trust-deduction-changes

https://www.schneiderdowns.com/our-thoughts-on/estate-planning-opportunities-covid19

https://www.schneiderdowns.com/our-thoughts-on/estate-planning-volatile-market