Estate Planning During Periods of High Inflation

Inflation has gone from a buzzword heard on the news to a very real part of daily life for Americans. While the “pain at the pump” or rising grocery bills are some of the most apparent signs of inflation, estate plans can also be impacted.

At its core, inflation means that your money has less buying power. While that may sound like it means that your estate is worth less, the market has seen some of the best returns over the past few years. Low-interest rates and rising costs of goods and services meant that many investors enjoyed gains and high returns on their portfolios.

While inflation will not impact everyone’s portfolio and estate plan in the same way, we have compiled a list of factors that should be considered.

Asset Appreciation

Estate plans should be reviewed periodically for several reasons, including a change in estate value. The volatile markets of the past few years will have impacted everyone differently. Still, in times of inflation, we generally see that assets are worth more, increasing the overall value of one’s estate. Meeting with your advisors to see how your portfolio has been impacted is key to taking advantage of today’s planning opportunities.

While interest rates are still low, it might be time to consider grantor retained trusts or charitable lead trusts to shift appreciating assets. If interest rates continue to rise, qualified personal residence trusts or charitable remainder trusts could be valuable tools in meeting estate planning goals.

Liquidity

With a historically high lifetime gifting exemption, it is not uncommon for families to already have made significant gifts to the next generation. Without proper planning, some donors find themselves without access to the funds they may have used for living expenses. Planning for a donor’s liquidity needs should always be a priority when creating an estate plan and maybe even more critical in times of inflation when cash has less buying power.  

Impact on existing plans

Gifts to the next generation are usually made with great thought and intent. With an inflationary economy, how has the intention of your gift been impacted? If you hoped that the next generation would be able to go to college or purchase a home with your gift, or if you planned for your favorite charity by leaving them a legacy gift through your will, are those plans still viable considering the rising costs we are experiencing?

2022 has proved to be as unpredictable as the few years before it. We don’t know for sure what the future holds, from foreign wars to ongoing supply chain issues and the looming sunset of the historically high lifetime exemption. So, while we don’t have a crystal ball, ATKG does have a team of professionals who understand how to make the most of your estate plan in any economy.