4 estate planning opportunities for volatile markets

When the stock market turns volatile and drops, it’s natural to worry about your retirement funds and other portfolios. However, you may also find some excellent estate planning opportunities hidden among all the turbulence.

As the ultra-wealthy understand, markets are bound to plunge downward at times. But history says they’ll turn upward again eventually. Even if you’re not ultra-wealthy, focusing on the long-term may ease the pain of your short-term losses. It may even help you set your family on the track to a better future.

Take advantage of the larger financial situation

Troubled economic times tend to lead to lower interest rates and depressed stock prices. Naturally, these lower stock prices hurt when you need to draw cash out of your retirement fund. But if you have time, you can use both the low interest rates and low stock prices to your advantage.

A recent article from Forbes illustrated several different options:

  • Gift stocks. The IRS limits the amount of money and other assets you can gift your children each year. While stock prices are lower, you can gift more stock than when the market surges upward again. The result is you transfer your wealth in a way it better serves your children, grandchildren or other heirs.
  • Refinance your mortgage. When interest rates drop to near-historic lows, refinancing may help you cut down on your debt and increase the overall value of your estate.
  • Trade your traditional IRA for a Roth IRA. Because you don’t need to take the required minimum distributions (RMD) from a Roth IRA, you can avoid drawing money from the depressed account. That means you save more for your heirs. Converting your IRA while your stocks are depressed also reduces the tax penalties you pay for its conversion.
  • Buy stocks. There’s always risk involved in stock purchases, but if you buy evergreen stock while they’re damaged, you may eventually benefit from greater returns. For example, the conditions that hurt travel stock in the short-term should eventually change, and people will want to travel again.

Of course, if you make significant changes to your assets, you’ll want to meet with your attorney to update your estate plan. And in uncertain times you may want to make sure you’ve identified back-ups for your power of attorney and executor. Depending on your circumstances, you may also address such timely options as a Grantor Retained Annuity Trust or Charitable Lead Annuity Trust.

Focus on the positive

Market volatility can be rough, but you don’t have to let it get you down. Instead, with some good counsel, you can focus on your long-term estate planning goals and look for ways to turn the market conditions to your advantage.