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Using Market Downturns To Preserve The Next-Gen’ s Wealth
Estate planners can look at economic contractions as windows of opportunity for wealthy families. By Matthew Erskine
FROM JANUARY 20, 2025, WHEN THE SECOND TRUMP administration began, until April 4, 2025, the Dow Jones Industrial Average fell 12 %. At one point, the U. S. stock markets lost $ 5 trillion in value in just a few days.
Periods of market volatility— whether it’ s driven by inflation, recession or global disruption— might seem like times to delay estate decisions, since the turmoil has many investors worried and cautious. But for estate planners serving ultra-wealthy families, these economic contractions are actually windows of opportunity. Depressed asset values and low interest rates open the door to a range of powerful strategies that can transfer substantial wealth to future generations at a reduced tax cost.
That’ s because down markets offer a chance to“ coil the spring” of asset value growth and shift it out of someone’ s tax- able estate— tax-free— before there’ s a rebound. For those willing to act strategically, the gains can be profound.
Gifting In A Down Market
Under Section 2512 of the Internal Revenue Code, for instance, the tax imposed on a gifted asset is based on its fair market value at the time the gift was made. So when asset prices decline, the same asset can be transferred at a lower value, so it uses less of somebody’ s lifetime exemption— or even be shifted without triggering gift taxes at all. If those assets had rebounded later, the appreciation would accrue to the next generation entirely outside the donor’ s estate, and the heirs would have to pay more in taxes on it. The search for valuation discounts is particularly compelling when the assets are hard to value, the way family-owned
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