How COVID Can Affect Your Estate Planning Needs

Life is always changing. With it, our estate planning needs to change as well. As far as major life upheavals go, nothing quite compares to the recent COVID-19 pandemic. As it appears to be winding down, at least we hope, now is a good time to take a hard look at your existing estate plan (or to create one for the first time) and evaluate whether your needs have changed over the last couple of years.

Major Economic Changes

Fortunes were made and lost during the pandemic. There’s hardly a single business that wasn’t affected in some way, and the stock market has been, at times, unpredictable. This means it’s time to re-assess the value of your assets. 

The overall valuation may have changed significantly, you may have sold off some properties or acquired new ones, or perhaps you put off retirement for a few more years. Any of these means your existing estate plan needs to be updated and adapted to your new economic circumstances. New investments and legal instruments should be considered to match your goals and minimize tax exposure.

Inflation is also a major factor to consider in updating or creating your estate plan. It’s no secret that high inflation rates currently afflict the global economy, and the U.S. economy is no exception. There are hopeful indicators that inflation has already peaked, but it has likely already affected your estate in a number of ways. The most common is an increase in real estate value and property taxes. There are ways to reduce the overall tax liability of your estate in situations like this, such as putting the property into an irrevocable trust. A general diversification of your investments is also a good way to ride out economic uncertainty.

For some people, inflation brings a few benefits. In 2022, the IRS increased the estate and gift tax exemption from $11.7 million to $12.06 million (double that for married couples). This means that a married couple who already maxed out their lifetime exemption can give away another $720,000 tax-free.

Similarly, the annual gift tax exclusion per individual was raised for the first time in several years, from $15,000 to $16,000. Married couples may give away $32,000 tax-free per individual per year without affecting their lifetime exemption total. It’s important to note that the lifetime exemption amount will be cut in half starting in 2026, so anyone wishing to take advantage should do so without delay.

Change in Outlook

While less tangible, the COVID pandemic has profoundly affected many people’s overall perspective on life. Perhaps they lost loved ones or became seriously ill themselves and started to rethink the legacy they would leave behind. 

Owners whose businesses had been stable for years went through great uncertainty, forcing them to reconsider succession plans and their long-term prospects. 

If you’ve arrived on this side of the pandemic and your outlook has changed, you should be sure your estate plan changes as well.

Meet With an Estate Planning Attorney

Any estate plan should be revisited from time to time as your goals and economic circumstances change. The COVID pandemic has almost certainly affected your estate planning needs, so now is a good time to sit down with an attorney and take stock of the situation. 

Our team has the experience and knowledge to create the plan that is right for your unique situation. Contact our office today.