The news surrounding financial markets during this time of global pandemic has been unsettling, to put it mildly. Still, these challenging times can present advantageous planning opportunities that might otherwise go unnoticed. Bartlett’s team of certified financial planners are diligently working to make recommendations to clients’ plans to reflect these opportunities.
We have identified eight key financial planning opportunities that are presenting themselves during this time of national – and global – financial challenge.
- Low interest rates
If you’ve considered refinancing an outstanding mortgage or other debt, this could be the time to take advantage of lower fixed rates. Similarly, low-interest borrowing options, such as pledged asset lines of credit or margin loans, might be a good option to provide for liquidity needs or cash flexibility.
- Tax loss harvesting
Markets have created unrealized losses in certain parts of portfolios. You can sell these assets at a loss in order to reduce your tax liability; or “harvest” losses to offset gains. When you harvest losses, you must wait at least 30 days before repurchasing another asset that is “substantially identical” to the asset sold for tax loss harvesting purposes.
- Portfolio upgrade
If you have some stocks that you have wanted to get rid of but did not for tax purposes, this is a time to sell them for either a smaller gain or even a loss, and upgrade to a better name.
- Roth conversions
If you were considering a Roth conversion in 2020, this market pullback is a good opportunity. You can convert all or a portion of the traditional IRA to a Roth at the lower market rates. You can even transfer assets in kind to avoid being ‘out of the market’ during the process.
- GRAT strategies
If you’re looking to pass the appreciation of your estate to the next generation, consider deploying a GRAT (Grantor Retained Annuity Trust) strategy. The 7520 rate is updated monthly and used to discount the value of annuities, life estates, and remainders to present value. The rate is at 1.2% for April, 2020, and a disciplined two-year rolling GRAT strategy smooths out any market timing. Consider substituting assets with current GRATs if they are unlikely to be successful and consider substituting a note receivable if appropriate. Visit the IRS website for more information.
- Government programs
Businesses owners eligible to apply for government-sponsored assistance programs have a unique opportunity to further their endeavors while doing their part to stimulate the economy, as low-interest and/or forgivable government funding may allow you to reinvest new capital into your growth strategy.
- Gifts to Family
If you’re planning a financial gift for family members, gifting to family during these lower valuations provides an opportunity to transfer more appreciation out of your estate.
- Charitable contributions
Remember, adjustments to tax law provides allowance of up to $300 of charitable deductions for non-itemizing taxpayers for tax years beginning in 2020 and relaxation of the limitations for those taxpayers who itemize. In addition, the 50% of adjusted gross income limitations on deductions for charitable contributions is suspended for 2020, compounding the benefits of charitable giving.
Volatility like we are experiencing creates angst around any change; clear communication and careful planning are essential. Your Bartlett advisor is here to help you consider the financial planning opportunities that make the most sense for your financial future.