ESTATE PLANNING IN A DOWN ECONOMY

The Facts: Before the economic downfall, I intended to meet with an attorney to revise my estate plan. Considering the fact that the value of my house and of my portfolio is significantly less than it was a year ago, I am hesitant to spend the money.

The Question: Should I wait until the economy improves before I revise my estate plan?

The Answer: The short answer to your question is "NO". Regardless of the state of the economy, it is penny wise and pound foolish to postpone meeting with an estate planning professional to insure that your estate plan reflects your current wishes and your economic reality. Everyone should have an estate plan to direct the distribution of their assets upon death, to address the needs of their minor children, if any, and to protect themselves in the event they become incapacitated. Because estate planning encompasses so much more than simply deciding who will inherit your assets, engaging in estate planning is just as important in a downturn as it is when the economy is booming or when your circumstances have changed due to a marriage, divorce, birth or death.

In today's economy when the value of your assets has decreased, there may be benefits to liquidating those assets at a loss and taking advantage of favorable tax laws. There may also be advantages to giving away assets after their value has dropped to avoid paying the increased gift and/or estate taxes that result when appreciated gifts are made or when your estate holds highly appreciated assets. Gifting depreciated assets may make sense as part of Medicaid planning since the lower value of the gift will trigger a shorter penalty period. Finally, historically low interest rates provide opportunities for various types of estate planning relating to gifting remainder interests in homes and making certain types of charitable donations.

Now, as always, it is important to seek the help of an estate planning professional to insure that your estate plan meets your needs and honors your wishes.