COVID-19 Impacts on estate planning

Retirement accounts

One of the provisions of the COVID-19 relief legislation, known as the CARES Act, that may be useful for you in the estate planning context relates to your retirement accounts. The CARES Act eliminates required minimum distributions (“RMDs”) during 2020.

If you have already taken RMDs for 2020, you can return these to your retirement account within 60 days of withdrawal. If the 60 days have already passed, these withdrawals cannot be returned under the current rules, but this time limit may change in the event additional notices are issued. A similar RMD waiver was also passed as a result of the 2008/2009 financial crisis and the 60-day rollover rule was later extended. So, it is possible that a similar notice will be issued later this year, in which case you may be able to return earlier withdrawals as well.

The CARES Act also waives the 10% penalty on early plan distributions for so-called coronavirus related distributions. To be eligible for such distributions you, your spouse, or a dependent must be diagnosed with COVID-19, or you must experience adverse virus-related financial consequences such as being quarantined, furloughed, laid off, etc.

Estate tax planning techniques that are more attractive to implement in the current environment

The current high federal gift, generation skipping, and estate tax exemptions of $11.58M are slated to return to their prior low levels of $5M (indexed for inflation) on January 1, 2026. If you miss the opportunity to use the current high exemptions, you may lose the ability to make significant tax free gifts. Tax planning techniques most commonly used to take advantage of these exemptions have become more attractive as a result of the current depressed asset values and low interest rates. In addition, it is possible that the exemptions will return to lower levels much sooner than January 1, 2026, as a result of the need for the government to finance the extensive relief packages that will be enacted to deal with the economic harms caused by the pandemic. The outcome of the 2020 election also has a possibility of changing the exemption amounts.

We recommend that you consider and implement these tax planning techniques sooner rather than later. Making large gifts of assets with a currently depressed value provides the opportunity to leverage your exemptions even more. There are a number of techniques available and we look forward to meeting with you to discuss which may be most appropriate in your specific situation.

Remote execution of estate planning documents

During these uncertain times it is even more important than usual to have updated estate planning documents in place. Our Trusts & Estate Planning Team continues to work remotely full time and can meet with you by phone or through internet conferencing to discuss your estate planning questions and needs. VT and NH emergency orders grant temporary authority to perform online notarization of documents so that you do not need to be in the physical presence of the notary. As a result, under certain circumstances we can meet with you via a secure remote communication link to witness and acknowledge your execution of documents.

To learn more about these or any other estate planning matters, please contact a member of our Trusts and Estates Team.

Related Practice Areas

Trusts & Estates