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Estate Planning Amidst COVID-19: Your Most Important Assets

Many estate planning lawyers in New Jersey and throughout the United States are hard at work helping their clients establish and update their estates in these uncertain times. After all, 58% of American adults have no estate planning documents at all, and many are now scrambling to get those in place. Even for those who were already prepared, the COVID-19 pandemic changed how certain assets should be evaluated.

The Basics

Your assets are items of value that you own. However, the various features of an estate plan are valuable as well since they protect not just these assets but also your rights. For instance, should you fall ill, a health care directive can dictate power of attorney and other aspects of your treatment. There are many people who have established a will but who have an incomplete estate plan because they have not dictated powers of attorney, guardian designations and so forth. The first step is to ensure that you have all your details carefully sorted out.

Assets With Beneficiary Designations

Beneficiary designations are a common oversight with estates. If you have a life insurance policy, for example, that money would pass to the beneficiary designated by the policy regardless of what your will or trust may dictate. Other assets that require you to track beneficiaries include retirement plans and annuities. A similar concern is asset titling. Assets like real estate, bank accounts, investments and business interests may all require their titling to be updated as your estate changes.

Assets With Depressed Value

The COVID-19 crisis has caused the value of many assets to be depressed. How you should proceed largely depends on how you plan to use those assets. If you have an asset that you plan to use in your retirement and you expect it to rebound, perhaps you should do nothing at all and just wait. If you have assets you intend to pass on to heirs, however, there are intriguing opportunities due to a historically low IRS hurdle rate. A grantor retained annuity trust — or GRAT— is a good example of how you can protect asset value long-term and pass it on to your beneficiaries.

Giftable Assets

There are opportunities when it comes to gifting as well. Interests rates are currently quite low. You can loan to a family member at a short-term rate of .91%. The borrower can then invest those proceeds and experience growth that not only covers the loan cost but also outperforms the value of the asset if it had just been inherited down the line. Beyond that, direct gifts can be an excellent way to reduce a current tax burden.

Financed Assets

Other assets to consider include real estate and other property that you may currently be financing. Due to current interest rates, there may be opportunities to reduce your long-term obligation. Even if there is no opportunity to renegotiate, the aforementioned GRAT may provide an opportunity to outperform the interest rate of the loan.

Digital Assets

It’s also imperative to ensure that your estate planning accounts for your digital assets. The law is still evolving on this front. It’s unclear if a PayPal account, for instance, would transfer just as a bank account would. Therefore, such assets should be identified explicitly. An even less clear example would be a profitable YouTube account. Such assets need to be explicitly protected not just from other potential heirs but also from the content platforms, media rights holders and so forth.

The Estate Planning Guidance You Need

Whether you’re just establishing your estate or you want to update it due to the current circumstances, it’s imperative that you speak to an estate planning lawyer as well as a financial planner. The Knee Law Firm, LLC, handles estate planning in New Jersey and is here to help. In many cases, you can even take advantage of our services from the comfort of your own home. Contact us online or call our Hackensack office today at (201) 996-1200 with any questions you may have. We’d be happy to schedule a free, no-obligation consultation.

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