Diversified Asset Management, Inc. – 2020 4th Quarter Newsletter
A Five-Point Covid Diagnostic For Family Wealth Management
A terrible truth of the Covid pandemic is that families are at greater risk of losing a matriarch or patriarch. Whether you're a beneficiary or grantor, here's a five- point diagnostic for managing family wealth; issues to consider that might require urgent action due to the unusual times we are living through:
When did you last update your will? Wills should be reviewed annually.
Do you need a revocable trust to avoid probate? State laws vary, so there are no hard and fast rules, but the Covid crisis has made the use of revocable trusts a more popular estate planning vehicle, preferable to a Will. Courts were recently shuttered across the country. It's prudent to continue expecting delays in the probate court process. If a family patriarch is intubated and can no longer manage family financial matters, a revocable trust facilitates the transition in the management of family assets. Whoever is named as successor Trustee may present the trust document to the bank (which should have a copy of it already) and the management of assets can then be assumed by the successor.
GRATS and other trusts should be reviewed, and they are expected to be recommended more often in managing family assets in the months ahead. Grantor retained annuity trusts (GRATS) are a way to freeze the value of an estate, to reduce estate taxes. For many years, GRATs have been set up based on the IRS's mid-term Applicable Federal Rate (AFR).
However, with the AFR dropping in mid-August to 40-basis points (0.40%), trusts may need to be updated to use the long-term IRS AFR. With higher taxes expected, due to the weakening U.S. balance sheet, locking in the long-term AFR on a GRAT is worth considering.
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Diversified Asset Management, Inc. – 2020 4th Quarter Newsletter
Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.
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