Trends – a direction or a way in which something is changing and growing. When we talk about financial trends, it means the momentum and direction of price, economy, and market. The first thing that comes to our mind while listening to the word “financial trend” is the stock market.
The stock market’s financial trends help the investor understand when to buy and sell their shares. Some people also envision their investment portfolio to learn new investment strategies and trends. However, many of us never think about how financial trends affect estate plans.
The process of planning who will be owning and managing your assets after your lifetime is known as estate planning.
A well-written Estate Plan will precisely lay out your preferences in the most tax-advantageous manner, so you can be confident that there will be no concerns, misunderstandings, or misconceptions about what you want. The estate planning lawyers in Fresno, Clovis, Sanger, and other parts of the USA can help you in making the best estate plan.
Like everything, the financial trends also keep on changing. They have a huge impact on your estate planning. Are you curious to know about the emerging trends? Then let’s dig right into it!
The New and Emerging Financial Trends and Their Impacts
- Higher Emphasis on Estate Tax Planning
The estate tax plays a vital role in our society despite being small and less focused. The families having properties in more than one state, federal estate planning will no longer work for you. The focus might shift from the federal estate to state estate and inheritance taxes. The calculations are easy if a single person owns the estate’s house. If families own properties in various states, the calculation of taxes becomes difficult.
In some states like Florida, there is no separate state death tax. If a person owns a permanent house in Florida and some residencies in other states, he will pay tax for all houses.
The state where the person lived will claim the estate taxes on his real estate property. The state might claim estate taxes on tangible property and some intangible assets. Determine the primary house and domicile for estate tax purposes. An estate planning lawyer can help you with these.
- Higher Focus on Intergenerational Planning
The family wealth increases over time. Greater wealth will pass down to the next generations. It becomes easy to estate plan as a family if you avoid federal estate taxes. Most insurance providers are working on old goals.
For example, they prevent wealth from government interference. It is now time to adapt to new goals. They should capture, preserve, and manage the assets for coming generations.
Besides the coming generations, the management of wealth affects the family. So, the family needs to sit down and discuss the goals and visions of an insurance provider.
- Low-Interest Rate
One of the financial trends that might affect estate planning is the low interest rate. The economists are expecting inflationary pressure in the coming future. But, no proof ensures the interest rate will rise in the upcoming years.
So, the trend will most likely continue in the next few years. It presents many planning opportunities for taxpayers.
- The Concept and Impact of Double Inheritors
Some portion of the population consists of Baby Boomers. These are the people following the Silent Generation and preceding the next generation. They will inherit the wealth from their parents and spouse. It means that they are double inheritors.
The estate planners should know the difference between male and female Baby Boomers. The strategies for estate planning are different for males and females because the market trends are different.
You should understand your best position in case of double inheritance. It is better to discuss it with an expert who can guide you.
- Inflation and Interest Rates
The financial institution and the product affect the interest rates. These rates might collectively increase or decrease due to inflation. The change in interest rates set by banks influences the economy as a whole.
The interest rates influence the following areas of the economy.
- Consumer and business spending
- Recessions
- Inflation
- Stock and bond interest rates
Inflation has a direct impact on prices. Borrowing money becomes easier when interest rates fall. People start pumping more cash into the economy. If the interest rates rise, borrowing becomes difficult.
The pandemic also affected the economy. The current rise in inflation is temporary. It is mainly due to the shortage in the supply chain of products. The prices steadily increase throughout history, but certain events cause unexpected spikes.
Estate planning becomes tricky in these events. We know the value of our assets at the current time. But we do not know how the economic changes will impact the value in the future. We want the value to increase with time. The rise in prices makes us think that the value is increasing. But, this makes troublesome changes in the taxes.
Sometimes, the increase in the value of your property increases the amount of payable taxes. You have to assess the value of property in relation to tax thresholds. It is important to keep a watchful eye on the total value of your estate to assess all the estate and inheritance taxes.
Things might get worse if the owner passes away at a time when the values of assets are very high. In this case, your estate forcefully pays taxes. In the end, the value of your inheritance is lowered many times than you expected it to be.
- Hedging Against Inflation for Your Estate Plan
Inflation is not always a bad thing. The value of your assets increase due to inflation. For example, if you buy a house at a certain price, you expect the price to increase over time. You will gain a huge profit if you sell it after a long time. Most people decide not to sell the house and pass it down to the next generation.
At the same time, inflation can also bring some adverse outcomes. We have some tips to hedge your estate plan against inflation.
- Keep an Eye on Tax Thresholds
The right knowledge about everything keeps you in a better place. You should keep an eye on the tax thresholds. It will be a relief to find out that you are away from any state of tax threshold. The tax thresholds change after a long time, and some thresholds are very low.
- Take Action When Needed.
What if you find out that you are near the tax threshold? You need to take the necessary actions. Make sure that you name the beneficiary designations.
Such assets are directly passed down to the beneficiaries if you pass away. They are not included in your estate. This can largely reduce the size of your estate.
Some common designations include:
- Retirement savings
- Financial investments
- Insurance policies
Take Away
In short, the rapidly changing financial trends have a great impact on estate planning. One should consult with an expert to understand these changing trends and their impacts on estate planning. They will guide you best about what to do with your assets.
