07 Apr Estate Planning in an Economic Downturn
In economics, the term recession describes the reduction of a country’s gross domestic product (GDP) for at least two quarters. The usual dictionary definition is “a period of reduced economic activity”, a business cycle contraction.
If you were an organisation you would be, amongst other initiatives, reviewing your business plan, seeking the input from professionals with specific expertise, expanding your relationships and focusing on the long term.
Why then should you not use the same principles on your personal financial well-being?
What should you be doing to survive the Economic Downturn?
You cannot change a bad economy, but you can change your response to the situation. You have control over your attitude, and ultimately this can make a huge difference in how you weather a difficult situation.
There is often a desire to place Estate Planning or the review of your existing Estate Planning entities on the back burner as you cut back on your expenditure. The reduction of expenditure is not entirely a bad thing as excessive debt and lack of planning can help to contribute to larger financial troubles.
However, in times like these, good Estate Planning becomes more important than ever.
Estate Planning is easier than most people think and in this economic climate, there are a few hidden opportunities – investments are severely depressed, property values are lower than they have been for some time – all of which can be used to your advantage in your planning.
If however, you are in the fortunate position to have estate planning entities in place already, you should review these and question any assumptions you may have made.
Review your will. Some wills include specific bequests to particular heirs e.g. my house to “A” and my shares to “B”. Perhaps the assumptions as to the value of these assets are no longer relevant.
Should gifting be accelerated? This may involve the imposition of gift duty, but could still be worthwhile.
If you are a trustee have you completed a review of how the trust’s assets are performing, how should the news be communicated to the beneficiaries?
Many family members will be helping other family members with increasing frequency during these tough economic times. Consider the gift duty implications of simply advancing funds with no documentation in place.
A well thought out Estate Planning exercise (whether this be for a new initiative or a review of existing legal entities) will allow you to maximise benefits to your portfolio in the short, medium and long term. It will also definitely assist you in minimising damage to your plans for the longer term.
This peace of mind is well worth the investment.
Economic Downturns are disconcerting but take charge of the planning that you can do.
We often view Estate Planning in terms of investments, property, finances and assets. Yes, it is all of these things but the focus of proper Estate Planning should be the people who will benefit from your efforts and legacy. This may be yourself in the long term or your loved ones after your death. Failure to do this can have negative consequences for all concerned.
I hope that this article illustrates a few of the many ways that Estate Planning can be of assistance.
For more information on Estate Planning, call Ian Mellett of Quay Law Barrister and Solicitor in confidence.
Phone: 09 5232408
UNAUTHORISED USE. The contents of this article may be subject to copyright, legally privileged and confidential. Any unauthorised use, distribution or copying of the contents is expressly prohibited.