The market determines what your home, your investments, and your savings are worth now…why wouldn’t it be just as important in the future? The answer is simple – it will be. People often forget this when they create an estate plan, operating under the assumption that assets will retain their current value or will continue to grow at the same rate as they have in the past. Because the market is volatile, your estate plan should be flexible.
For example, let’s say that you have two children and you wish to leave them equals shares of your estate. You also have a home worth $200,000 and stocks worth $200,000. The simple way to handle their distribution would be to give one asset to each child right? Wrong! What happens if the housing market bottoms out or your stock value soars right at the time of your death? Your equal gift is not very equal now.
One solution is to create a trust and give your trustee a significant amount of discretion. If you place the assets into the trust, then your trustee can manage them and distribute them equally regardless of how the market increases or decreases their value. Of course, this increases the importance of choosing an experienced and trustworthy trustee for your trust. Be sure to sit down and talk to your estate planning attorney about how best to account for market fluctuations in your estate plan.