The novel COVID-19 pandemic situation has abrupted economic activities around the world. Under such conditions, individuals are skeptical about investing, saving, or diversifying their finances. Here is where being aware of the estate and tax planning essentials during COVID-19 will serve the individual well.
Estate and Tax planning essentials during COVID-19:
Identify opportunities: The current economic situation, although turbulent has nevertheless brought some opportunities to light for the investors. As many assets are of lower values under current economic skies, there are significant gift and estate tax planning actions that when taken now, would benefit the investor later as the asset values and interest rates rebound.
Consult your financial advisor: Current unpredictable economic situation necessitates extra care to ensure prudent decision-making on the part of the investor to avoid possible financial risk. Careful consideration of the investor’s portfolio will enable them to decide whether to reallocate assets or consider tax loss harvesting is appropriate to their financial situation. Consulting a professional financial advisor such as Paisa Invest will help an investor do just that.
Consider GRAT in the current low-interest-rate environment: Since GRAT works exceptionally well in a low-interest-rate environment such as the present economic scenario around the globe, experts such as the in-house professionals at Paisa Invest advise investors to revisit GRAT. Besides, a GRAT created in the existing conditions will probably lead to repositioning excess value (the appreciation above the hurdle rate) to the ultimate recipient of the GRAT property.
Re-evaluate existing loans: A loan borrowed by a family member is liable to be charged a certain amount as per the directives of IRS. These interest rates are considerably low. When the borrower attains a rate of return with borrowed funds that exceed the IRS interest rate chargeable from the same by the lender, those excess returns constitute a wealth shift without a gift tax on the lender.
Obtain tax basis knowledge: Estate and tax planning should be done with proper evaluation, knowledge and understanding its effect on the financial wellbeing of an individual over a period of time. Since this planning involves a lot of laws and is subject to change as per the mandates given by the authorities, one should remain informed about all the latest directives in the sector. Donors should be aware of the tax basis of any asset that is the intended subject of a gift.
Hence are the most fundamental points of estate and tax planning essentials during COVID-19 that every individual should carefully consider before deciding the same. A wrong decision made in estate and tax planning can disrupt the financial health of an individual for a long time.
Do you need professional assistance to plan your estate and taxes? Contact Paisa Invest today!
