Potential Estate Planning Opportunities in 2020 to Implement Now


This year has been like few others in recent memory, especially due to the COVID-19 pandemic. A confluence of factors, however, has created a rare opportunity to implement estate planning strategies that could pay off for years, even decades, to come. Did you know that now may be the time to take action as market conditions and policy changes could be around the corner? Let us discuss several aspects of current events that provide potential planning opportunities in 2020.

Politics aside, presidential elections involve potentially massive shifts in public policy. While one side is traditionally prone to raising taxes, there may be a bipartisan need to raise government revenue to pay for trillions of dollars in COVID-related stimulus spending. Planning now for increased taxes could yield significant savings. This can be particularly true for estate taxes. Current estate tax and gift tax exemption limits are scheduled to sunset on December 31, 2025. Starting in 2026, the estate tax exemption limit will be reduced by roughly half. New election proposals have floated an even greater reduction in the exemption limit while raising the current estate tax rate.

The coronavirus crisis may have devastated the economy in terms of lost jobs, shuttered businesses, and depressed asset values. While the stock market seems to have recovered, many estate assets remain lower than their pre-pandemic valuations. At some point, an economic rebound may be likely to happen. Gifting under-valued assets to future heirs, however, provides huge potential benefits. For tax purposes, gifts are valued on the date they are given. Thus, any future appreciation will escape normally associated tax.

In response to this year’s economic challenges, the Internal Revenue Service has offered all-time low applicable federal rates (AFR). AFR applies to loans between private parties. Making a loan to a family member, for example, may have never been cheaper. A family member could invest an estate loan at record low interest and retain future market gains. AFR, however, is determined by certain short-term economic factors, which may lead to rate hikes once the economy sufficiently begins to recover.

There may be other ways to take advantage of current opportunities to benefit your estate and future heirs. For more help with related issues, please contact our office to schedule an appointment.