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Estate planning in a turbulent market

On Behalf of | Mar 16, 2020 | Estate Tax

Having an estate plan is an excellent step toward establishing one’s legacy in California. But like so many things in life, estate planning is meant to be an ongoing process. The plan should be reviewed and revised as needed every few years. The current fluctuations in the market can be viewed as a time to perhaps review one’s plan.

While the market downturn can cause a person to have indigestion it can also present certain opportunities. One option a person may wish to consider regards converting a traditional IRA to a Roth IRA. This may be particularly true if one has a large IRA that is intended for one’s children or grandchildren. Converting an IRA to a Roth IRA requires that the taxes be paid on the converted amount as if it were income for the tax year. With the value down the taxes due will be less and the proceeds from Roth IRA will not be taxable as the taxes have already been paid.

In addition to taking care of the taxes at a lower rate than would have been due in February when the market was at its peak, one does not have to take required minimum distributions (RMD) from a Roth IRA during one’s lifetime. This further simplifies the process of designating those funds for loved ones. Any gains that the Roth IRA makes during one’s lifetime will also not be taxed when the asset passes to loved ones.

Riding the market roller coaster can be a taxing experience but there are constructive actions that can be taken. A person in California who is concerned abut the state of one’s estate planning may wish to consult with a legal professional. A knowledgeable attorney can review one’s assets and existing situation and make recommendations for possible actions to be taken.


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