Estate planning is about both planning to take care of yourself during your life with legal tools like powers of attorneys and living wills. It is also about taking care of your family, money and property should the unexpected happen. There is no denying that we are in an inflationary economic period. How does this impact your estate plan? In this article we will touch upon the following ways that inflation can impact your estate plan:
Can inflation help me in some way? How? How do I protect my assets that have increased in value?
Could inflation put me at risk of increased taxation? Are there ways to deal with or maximize my taxable exemptions?
What assets do well during inflationary times? Hands down, hard assets. Hard assets are tangible assets with fundamental value. Assets like land, real estate, consumer goods. Investopedia.com lists some examples of hard assets to include[1]:
- Buildings
- Vehicles such as trucks or cars
- Machinery and equipment
- Office furniture
Can inflation help me in some way? For most of us, hard assets mean real estate, our home. For others hard assets could include the home and rentals or a vacation home. For business owners, hard assets could mean their machinery, desks, computers, etc. If you are a real estate investor you stand to see an increase in value in all the real estate in your portfolio. This is great from the standpoint of increased value of the assets but also presents some other challenges in protecting and passing those assets.
How do I protect my assets that have increased in value? Trusts do a great job at avoiding probate with any asset and the long, drawn out, and often costly court process associated with probating a will. Irrevocable Trusts also have the added benefit of protecting assets for our use during our lives, while adding a separation between the person and the assets for liability reasons and are not countable assets to that individual in situations where benefits like Medicaid are tapped to pay for assisted living or nursing home care.
Certain types of deeds can also be employed to protect real estate assets while also maintaining control of those assets. Ladybird Deeds are great tools to maintain control of the home, avoid probate, and pass the asset to children or those whom we choose. For properties other than the home, Frankenstein Deeds (also technically called Tenants in Common with Rights of Survivorship Deeds) can function in much the same way as a Ladybird Deed while also having the benefit of keeping a person qualified for Long-Term Care Medicaid to pay for nursing home care. I will introduce and discuss Frankenstein Deeds in a subsequent article.
Could inflation put me at risk of increased taxation? With a rise in value of real estate there is more concern about reaching an estate and death tax exemption limit. In addition, certainly, there is also an annual increase over time in property taxes on the value of that real estate as well that should be budgeted and accounted for.
Are there ways to deal with or maximize my taxable exemptions? Yes! Trusts!!! Trusts, when properly drafted, allow you to double the taxable exemption of the trust estate. If your real estate and other asset holdings are titled in the name of the trust the trust can be written to double the taxable exemption of the estate and death tax. This could be the difference between decreasing an estate by almost one-half (1/2) for assets that exceed the estate and death tax exemption. This can be avoided by utilizing trusts as part of your estate plan.
In inflationary times, with hard assets like real estate increasing in value it is smart to take inventory of the value of our assets and to plan accordingly lest we fall prey to probate, excessive taxation and disqualification for needed benefits. Our firm is built to help with these estate planning matters, and we would be glad to offer a FREE consultation to discuss protecting your assets and maximizing your taxable exemptions and availability for benefits if needed. Schedule your FREE consultation today at: mcelderlaw.com/scheduling or call: 704-749-9244.
[1] Investopedia. Hard Assets. https://www.investopedia.com/terms/h/hard_asset.asp
Gregory S. McIntyre, J.D., M.B.A.
Estate Planning & Elder Law Attorney
