Inflation and Your Estate Plan: What to Do Right Now

For the last year or so, rising inflation rates have been all over the news. Are concerns about inflation justified? Maybe…and maybe not. While some experts believe current inflation trends are temporary, others worry we are on a trajectory of inflation that could go on for years. Time will tell who is right, but for now, it’s important to be aware of how inflation can impact your estate plan.

Having an estate plan is always important, but it is even more vital during times like these. Here’s why.

Wealth Preservation

Over time, inflation erodes the purchasing power of money. Assets that may have seemed substantial when you acquired them may lose their real value due to rising prices. As a result, your beneficiaries may receive assets that are worth less in terms of purchasing power than initially intended. By having an estate plan, you can take steps to preserve your wealth and ensure its efficient transfer to beneficiaries. Estate planning tools like trusts, gifting strategies, and tax planning can help protect assets from inflationary pressure.

Cost of Living

Inflation can lead to an increase in the cost of living for everyone. This could affect the lifestyle and financial needs of your beneficiaries. If your estate plan does not account for this, your beneficiaries may find it challenging to maintain their desired standard of living in the future.

Tax Implications

Tax thresholds, exemptions, and rates may be adjusted for inflation over time. This means that the value of the estate subject to estate taxes may increase, potentially affecting the overall tax burden on the estate and its beneficiaries. Estate planning can also help minimize the impact of estate and inheritance taxes, allowing you to pass on a larger portion of your assets to heirs.

Beneficiary Protection

Estate planning allows you to define how your assets should be distributed among your beneficiaries. It enables you to consider the potential impact of inflation and establish strategies to safeguard the financial well-being of your loved ones.

Healthcare and Long-Term Care Costs

Inflation tends to have an outsized impact on healthcare expenses. As people age, medical costs tend to rise, and if the estate plan does not account for this, it may deplete the assets meant for other purposes. Advanced healthcare directives, powers of attorney, and long-term care provisions can help ensure that your medical and financial wishes are respected during times of increasing costs.

Inflation Disproportionately Affects Older Adults

Inflation affects older adults differently than the young. While young Americans may face challenges in managing living costs and debt, the elderly may experience difficulties with fixed incomes and healthcare expenses. Inflation underscores the importance of estate planning, which helps individuals preserve wealth, address healthcare costs, protect beneficiaries, and optimize tax efficiency in an inflationary environment.

Take these steps to safeguard your estate plan from the ravages of inflation:

Regular reviews: Periodically review and update your estate plan to ensure that it reflects changing economic conditions and addresses potential inflationary effects.
Inflation-adjusted provisions: When setting up trusts or bequests, consider incorporating provisions that allow for inflation adjustments to the distributions or funding amounts.
Professional guidance: Consult with a qualified estate planning attorney or financial advisor who can help you navigate the complexities of inflation and create a comprehensive plan that addresses potential challenges.

Working with an Estate Planning Attorney Can Help

An estate plan provides you with peace of mind, ensures that your wishes are respected, protects your loved ones, and helps minimize potential legal issues, taxes, and conflicts that may arise after your passing or in the event of incapacity.

The trusted estate planning attorneys at Kimbrough Law have the necessary legal knowledge to help you review your goals and adjust your plans at this crucial time. A financial planner can also run scenarios with even higher inflation to stress test your estate plan. Make sure that your family's best interests are protected by educating yourself about your options. You will be glad you did.

Contact Kimbrough Law for personalized estate planning services in Northeast Georgia. Call 706.850.6910 to get on the schedule.