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How to conduct estate planning during deflationary times

Arizona estate planning attorney

Successful estate planning is linked to the idea that an asset will be worth more money in the future than it is now. Think about a home purchased in a desirable neighborhood 20 or 30 years ago. Today, it likely will be worth more.

During these uncertain times, the concept that financial professionals call “time value of money” may no longer be valid. The COVID-19 pandemic has some economists and financial professionals warning of a deflationary spiral. Even if we avoid inflation, the economic slowdown linked to the pandemic crisis is likely to continue for many months to come and have an impact on estate planning.

What are top estate planning strategies during a deflationary period?

According to a recent Forbes article, people should consider strategies to create an estate plan during inflationary and deflationary times. The following are brief summaries of the strategies. Keep in mind that estate planning can be complicated during the best of times, so contact an experienced estate planning attorney to discuss these and other strategies in further detail.

  • Strategy One: Choose assets and gift them today tax-free (using the $11.4 million unified tax credit). For example, you can gift a diversified portfolio of stocks and bonds that has recently taken a 25 percent hit. The portfolio is likely to recover in value. By gifting now, you can leverage the unified tax credit by 25 percent.
  • Strategy Two: Use trusts with flexible provisions that allow you to recover assets you need if the rest of your estate drops in value. You can keep the income from your assets while excluding them from your estate.
  • Strategy Three: Make a gift through a trust.
  • Strategy Four: You can take an approach that allows you to freeze the value of your assets at today’s dollar amount but also gives you some amount of return.

Why you need to talk with an estate planning lawyer

Estate planning during an economic crisis can seem overwhelming. You will want to create a plan that offers the best amount of return. No one wants a deflationary period, but high unemployment will lead to weak demand. The possibility of a decline in prices is very real.

Our Mesa, Arizona, estate attorneys have the experience and resources to help you make sound decisions for your future during these uncertain times. We offer our clients personalized advice and would be happy to discuss planning strategies. Contact Brown & Jensen for a free consultation.

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