How Inflation Impacts Estate Planning
For the past few years, inflation has been abuzz, with many feeling its effects on their daily lives. As cost of goods and services rises, it is essential to consider how inflation can also impact your estate planning, as inflation can complicate your plans in ways you did not expect. Read on to explore the relationship between inflation and estate planning.
What is Inflation?
In simplest terms, inflation refers to the rate at which the general level of prices for goods and services rises, causing a decrease in purchasing power. Inflation occurs when the value of a dollar decreases over time.
Why is Estate Planning Important?
Estate planning ensures your assets are distributed according to your wishes, and effective estate planning minimizes taxes and can help you avoid potential disputes among heirs. However, especially during times of inflation, people fail to review their estate plans, leading to unintended consequences.
How Does Inflation Affect Estate Planning?
Here are 3 ways inflation affects estate planning:
- Asset Valuation
- Purchasing Power
- Tax Implications
Asset valuation is the process of determining the worth of the value of an asset. Its purpose is to asses the fair market value. For example, you purchased a home for $300,000 and a decade later, that home could be worth significantly more. This will result in a higher estate tax liability if your estate exceeds the exemption limits.
Purchasing power means how much you can buy with your money. As inflation erodes purchasing power, successors may find that their inheritance they receive does not go as far as it once would have. For example, your heirs receive $100,000 but because of inflation the same amount may only have the purchasing power of $80,000. Setting a plan for inflation can help combat this.
Inflation can also affect estate taxes, as exemptions and brackets for estate taxes are not always adjusted in line with inflation, meaning individuals may be subject to a higher tax rate simply because asset values have increased. Staying well-informed of current and ever-changing tax laws and how the interconnect with inflation is crucial for estate planning.
Work with a Professional
Navigating the complexities of inflation and estate planning can be challenging. That is why it is essential to work with a professional can offer personalized strategies based on your unique situation, ensuring that you take the necessary steps to protect your legacy.
Reach out to Oklahoma attorney, Kevin L. Miller, PC to get started on your estate planning. Kevin has over 35 years of experience in helping individuals and families of all kinds. With Kevin L. Miller, PC your experience is tailored to your situation.
He said, “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.