Estate Planning in a Down Economy

Elder couple estate planning during a recession

With inflation causing the price of gas, groceries, and nearly every other product to increase, you are probably focused on your day-to-day expenses. Estate planning may not be at the forefront of your mind, but estate planning in a down economy is necessary to protect yourself and your assets.

We all feel the sting of inflation and are concerned about our 401(k) plans and other retirement assets. At Surprenant & Beneski, PC, we understand that strong estate plans and retirement plans are essential tools for weathering a downturn. After carefully reviewing your current estate plan, we can advise you on strategies to protect your assets against inflation and a recession. Contact Surprenant & Beneski, PC, to learn how we can help you protect your assets.

Make Estate Planning a Priority During Inflation

During a recession and record-high inflation, estate planning may seem like a service only the wealthy should utilize. While estate planning may seem like a luxury, estate planning is one of the best ways to protect the assets you’ve already earned from a down economy. The first way to protect your assets is to guard them against creditors. 

Your mortgage lender and credit card company are two of the most common creditors. You can’t transfer assets to another entity to shield them from creditors you currently have. You can protect your assets from future creditors by transferring them into a business entity or specialized trust. An unexpected lawsuit, unemployment, or catastrophic injury could happen at any time, jeopardizing your financial future. With the uncertainty of the financial markets, protecting your assets now is prudent. 

Review Your Current Estate Plan

Inflation and other financial issues related to a recession can be accounted for as part of your overall estate plan and retirement investment strategy. Reviewing your current estate plan is the first step to taking to an estate plan in a down economy. We will take a detailed look at all of the assets in your estate, including real estate, cash, and other assets. In partnership with your financial advisor, our attorneys can help you look at your investment vehicles, including stocks and bonds, and the behavior of markets over time to decide whether you should tweak your current investment protection strategy. 

At Surprenant & Beneski, PC, we work with other qualified professionals such as investment strategists and financial planners. After we review your estate plan and understand your unique needs and goals, we can work with a team of experts to suggest course corrections you can take to make your estate plan work to its full potential, even in the down economy we are facing.

Consider Your Tax Liability

Many people don’t realize how dangerous inflation can be in terms of how it can affect a person’s tax liability. For example, the price of real estate commonly increases during inflation. Suppose you own real estate as part of your investment portfolio. In that case, your beneficiaries could be exposed to future tax liability because the value of your real estate increased significantly due to inflation. 

Another way to avoid tax liability is to consider creating a charitable trust or an irrevocable trust. When you create an irrevocable trust, the appreciated value of your real estate will not increase your taxable estate size. By using an estate planning tool such as a trust, you may be able to reduce your tax liability. Inflation is bad enough without the government reaping a significant portion of your assets.

Diversifying Your Estate Plan in a Down Economy

The more diversified your estate plan is, the more flexibility you will have. The phrase “you should not put your eggs in one basket” is true regarding estate planning in a down economy. You can protect your assets, increase liquidity, and ensure growth by spreading your investments across real estate, bonds, stocks, and other investment vehicles. All those stocks are more volatile, especially in a recession. They generally have larger returns when the economy goes up again. 

Bonds are not subject to as much volatility, so they may be a better choice for conservative investors. Purchasing I bonds allows the rate of return to be adjusted for inflation. Putting some of your investments in a real estate investment trust (REIT) allows you to invest in real estate but retain more liquidity than purchasing real estate. 

Protect Yourself Through Liquidity 

During economic downturns, it’s important to have liquidity or readily available cash. Making sure your investment strategy includes liquidity will help you ride out a down economy without adversely affecting your estate planning and retirement assets. For example, a liquidity strategy may involve having a percentage of your investment in vehicles that you can easily convert into cash, such as a bond or savings account. Doing so gives you easy access to cash when needed but allows you to use the rest of your assets to remain in long-term growth vehicles.

Using Life Insurance to Protect Your Estate in a Down Economy

Placing insurance policies mainly provides your beneficiaries with liquidity after you pass away. Your loved ones can access cash to cover pressing bills and expenses in the difficult time after your death. However, some life insurance policies have an undervalue. The policy may allow you to access cash while you’re still alive. 

Life insurance may also serve as collateral for a business loan or be used to fund a buy-sell agreement. As the owner of your life insurance policy, you can choose how the proceeds will be used. You can create a trust, transfer the life insurance policy into the trust, and dictate that the assets from the policy should continue supporting a loved one after your death.

Contact an Estate Planning Attorney in Southeastern Massachusetts

The skilled attorneys at Surprenant & Beneski, PC, specialize in developing and implementing comprehensive estate plans for Southeastern Massachusetts clients. We have been able to help our clients navigate down economies in the past. Using our extensive experience and providing each client with the individualized attention they need and deserve, we can help you recession-proof your estate plan. Contact Surprenant & Beneski, PC, today to schedule an initial consultation.