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COVID-19 and Estate Planning

COVID-19 and Estate Planning

With the current market volatility and economic downturn, many individuals are wondering how this economic crisis will affect their business, assets, and retirement. With all the uncertainty, we want to focus on an aspect that is certain. While estate planning may not be at the forefront of your mind, it is a great time to take advantage of potentially lower estate values that help minimize gift and estate taxes.  Below are several benefits of reviewing your estate plan during an economic downturn. For additional questions, schedule a free consultation with Peak Business Valuation. 

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Tax Reduction

Economic crises often reduce the value of assets. If you are considering gifting some of your estate, the lower the value of your estate is – the less you will end up paying in taxes. Not to mention, the heir(s) will also benefit when the market stabilizes, and assets return to normally high and growing levels.


Valuation Discounts

During times of market volatility, valuation discounts are often larger. A few discounts your valuation may include are discount for lack of control and discount for lack of marketability.


Lifetime Exemption

The lifetime gift tax exemption is the total amount you can give way tax-free over the course of your life. In 2020, the lifetime gift tax exemption is $11.58 million per individual. If you plan to use this benefit, it is best to use it soon as this gift and estate exemption is being retired in 2026.


Loss Harvesting

Low-interest rates offer the opportunity for “loss harvesting.” Loss harvesting means selling your stocks at a loss to offset gains you may have realized. With the financial markets declining over the last little while, you may have some unrealized losses in your investment portfolio. If you were to sell those assets and realize the loss you can offset unrealized gains on other assets. This is if you were to realize those gains before the end of the year. Loss harvesting should be carefully considered with your financial advisor.


Grantor Retained Annuity Trusts (GRATs)

The economic condition also makes transfer tax planning beneficial. To support the economy, the government has made interest rates very low. Investments like Grantor Retained Annuity Trusts are very effective in low-interest-rate environments.


Roth Conversions

Lastly, converting a traditional IRA into a Roth IRA has several advantages. The main advantage of a Roth IRA is the ability to avoid paying income tax on money withdrawn during retirement. This tax benefit also applies to your beneficiaries if they inherit the money after you pass.

When you convert a Traditional IRA to a Roth IRA, you pay income tax on the value of the converted assets. In the current economic condition, the value of the assets may have declined. Converting to a Roth IRA will result in significantly less tax expense. Before considering this strategy, speak with your financial advisor.


While there are many adverse effects of COVID-19, take advantage of opportunities to transfer your assets at relatively low values and review your estate plan. Work with your attorney and financial advisors to determine the best way forward.

Peak Business Valuation is here to help you understand the value of your estate, calculate valuation discounts, and provide guidance for your estate planning. Questions are always welcome! Please reach out by scheduling a free consultation.

Be sure to also take a look at Valuing a Business During COVID-19 as well as The Impact of COVID -19 on the Value of Your Business.


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