How Inflation Impacts Estate Planning

Over the past few years, inflation has been a topic of discussion for many people, as many of them have actually felt it in their day-to-day lives. As prices rise, it is important to realize that inflation can also affect your estate planning because inflation can counter your plans in a way that you may not have anticipated. Keep reading to find out how inflation is connected with estate planning.

What is Inflation?

In the simplest form, inflation can be defined as the increase in the general level of prices of goods and services in an economy. Inflation arises from the situation in which the value of a dollar decreases with time.

Why is Estate Planning Important?

Estate planning is the process of ensuring that your assets are distributed as you desire and good estate planning can also help to reduce taxes and avoid problems among heirs. However, due to the effects of inflation, people do not update their estate plans, which may have some effects.

In this article, we will discuss three ways through which inflation impacts estate planning.

Asset Valuation

Purchasing Power

Tax Implications

Asset valuation is the process of determining the value of an asset. Its purpose is to asses the fair market value. For example, you bought a house at $300,000 and a decade later, that house may be worth so much more. This will result in a higher estate tax liability if your estate is more than the exemption limits.

Purchasing power is the ability to buy goods and services with a certain amount of money. Since inflation reduces the purchasing power of money, the recipients of the heirs may find that their inheritance does not buy as much as it could have.

For instance, your heirs receive $100,000 but because of inflation the same amount may only have the purchasing power of $80,000. This is where setting a plan for inflation comes in to help this.

Inflation can also affect estate taxes because exemptions and brackets for estate taxes are not always adjusted for inflation, and thus, people may be subject to a higher tax rate for nothing other than the rise in asset values.

It is important to know the current and the ever-changing tax laws and how they relate to inflation in the context of estate planning.

Work with a Professional Navigating through the inflation and estate planning can be quite tedious. However, it is worth noting that a professional can come up with specific ideas that are suitable to your situation and ensure that you do all that it takes to ensure that your legacy is well protected.

Contact Kevin L. Miller, PC in Oklahoma to start your estate planning. Kevin has been practicing for more than 35 years and has helped people of all kinds of families. With Kevin, the approach is tailored to your situation.

He says, “I firmly believe the greatest gift a person may pass on to his or her family or loved ones is a well thought out and easy to understand estate plan. It can make a world of difference and make matters easier after a loved has passed.”

Call Kevin L. Miller, PC today at (405) 443-5100.

Reference: https://trustandwill.com/learn/how-inflation-affects-estate-planning?srsltid=AfmBOorivYZTfGtTbaQeEWTpvM9d4o1cmf4taAXhQ7dWf2QmDx6zerRl