How COVID-19 Has Affected Certain Assets More Than Others

The initial reaction to the COVID-19 outbreak was sheer panic on the part of investors. In May, the S&P 500 dropped roughly 30% in just 22 trading days. Many estate planners are now wondering which types of assets have been most affected by the pandemic.

Stock Market Prices

The most obvious pandemic-related effect on assets has been the impact on stock prices. Investors sweated out the steep drop in the stock market before being able to breathe easier as the market recovered. For trustees and executors, the market volatility presented them with difficult choices to make as they sought to preserve the assets of trusts. If they acted rash or carelessly, they could be held liable for the losses. The best way for a fiduciary to handle this type of jaw-dropping volatility is to seek help from an experienced professional such as an investment manager. This is the safest course of action because getting professional help can protect one from future liability in a breach of fiduciary duty lawsuit. At a minimum, they should consult with an estate planning lawyer before making any major moves with stock-related assets.

Bond Prices May Change

Moreover, if an estate or a trust holds bonds, these will also be affected by the pandemic. However, it is difficult to give a uniform answer as to how the price will move. If the account holds U.S. Treasury Bonds, those have performed well during the pandemic as the interest rates have moved toward zero. However, municipal bonds, which are a favorite of investors seeking a less risky place to put their money, have suffered as the cash-strapped cities have major holes in their budgets. Moreover, corporate bonds have also performed poorly as credit spreads have gotten wider and bonds have deteriorated in quality. The effects on bond prices may still ripple through in the fall.

Heirloom Items Are Harder to Sell

The market for legacy heirlooms such as fine art may continue to suffer during the pandemic. It is more difficult to sell items such as these right now. First, people are not in the market for heirloom items when the demand for luxury goods has dropped. Second, it is harder to sell personal property because there are few auctions right now and people cannot see what they are buying. If your estate has many high-end items to sell, now would not be the time to do it. You are better off waiting to sell upmarket items when the COVID-19 pandemic passes and you can get more of a robust market.

The Effects on Real Estate May Materialize Soon

Finally, real estate prices could have a perilous future due to COVID-19. One of the major things that an executor must decide how to do is to sell the family home. The market for housing has not necessarily dried up as low interest rates still mean that there is a demand for homes. However, even with rates lower, fewer people can qualify for funding due to economic upheaval caused by the pandemic. Buyers may also have difficulty viewing a home due to social distancing measures. Even though real estate prices have remained steady, the logistics of selling a home have changed.

An executor may only be able to prepare for when they can sell the home as opposed to taking concrete steps right now. The good news is that housing prices have actually continued to rise. However, if the predicted foreclosure crisis materializes, that could begin to hit housing prices. This is something that a trustee or executor needs to watch for as they decide the best time to put a home on the market. There is a possibility that housing can get hit in the fall if stimulus packages fail to improve the economy.

To learn more about how changing asset values can affect the duties of the trustee and executor, contact an estate planning lawyer at the Knee Law Firm. We’re prepared to answer your questions and provide legal representation. Call our office in Hackensack, NJ, at (201) 996-1200.