Senior Vice President & Region Head, West Coast Region, Financial Counseling
Senior Vice President & Region Head, Midwest Region, Financial Counseling
Right now, there are a lot of forced savings opportunities. People are eating out less. People are shopping less. Vacations and travel are getting canceled.
The current interest rate environment means it might be a good time to look at refinancing or consolidating your debt. If there is an opportunity to reduce monthly payments, it could help weather the storm.
The real estate market will likely be affected by the coronavirus’ impact on the country’s psyche. The experience of self-quarantine and social distancing may cause many to reconsider their living environments—for example, densely populated cities versus the suburbs. These personal decisions will likely vary widely from housing market to housing market but could impact prices in some way.
If you’re looking to buy a home, it may be a challenge just to get logistics completed. Appraisals and inspections are difficult to coordinate under social distancing and shelter-in-place guidelines.
The current interest rate environment may make this a good time to look at refinancing or consolidating all types of debt. If there is an opportunity to reduce monthly payments, it could help improve cash flow at a time when unemployment concerns are high.
If you’re refinancing a mortgage, keep in mind that government restrictions may prevent appraisals or inspections.
The COVID-19 pandemic presents unprecedented challenges but at the same time, the volatile markets and low interest rate environment have created several financial planning opportunities.
Wealth transfer and gifting in particular have been a focus area for our clients. If there are equities you think will have strong, long-term value, gifting the stock now can lock in the gift tax on a depressed valuation.
If you had large capital gains earlier in the year, tax-loss harvesting could be used to offset the gain by recognizing capital losses—but watch out for the wash-sale rules.
The depressed market valuation and the low April 7520 rate of 1.2% present an opportunity to fund a Grantor Retained Annuity Trust (GRAT) with assets that are expected to perform better in the coming years.
Now is a good time to revisit your estate plan and make sure the provisions function the way you intend, especially given market uncertainty. Make sure your trusts are properly set up, the executors are right people, etc. It can help put your mind at ease in tumultuous times. It may also be a good time to explore more advanced wealth transfer techniques like GRATs.
Read Part 1 of this series >
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Updated for tax year 2020
Updated for tax year 2019