Volatility introduces complexities to estate planning, as fluctuating market conditions can influence long-term strategies. Yet, with the right approach, wealth advisors and RIAs can help clients turn market swings into opportunities to maximize estate value for future generations.
While many associate estate planning with bull markets, some of the most effective strategies emerge during downturns, when asset values are low. Leveraging depressed valuations enables wealth transfers with enhanced potential for future growth.
Prioritizing Asset Quantity Over Current Value
During periods of market instability, focusing on the number of shares rather than their current price can be more effective. For example, with the annual federal gift-tax exclusion set at $19,000 per recipient in 2025, clients can transfer more shares while remaining under the exemption limit.
Krysta Dos Santos, head of financial planning at GenTrust, emphasizes this strategy: “Lower asset prices allow recipients to gain more shares within the same gifting threshold, positioning them to benefit from future market rebounds.”
For clients concerned about the federal estate-tax exemption—currently nearly $14 million per individual—volatile markets present unique opportunities. Consider a business valued at $15 million in a strong market but temporarily worth $14 million during a downturn. Placing that business in a trust at its lower valuation enables clients to avoid estate taxes on the excess $1 million, while any future appreciation occurs outside the taxable estate.
“We can’t predict market movements, but historically, recoveries happen,” Dos Santos notes. “That growth occurs outside the estate, shielding both the initial transfer and the subsequent gains from taxes.”
Planning Amid Potential Policy Changes
Legislation could significantly impact estate-tax exemptions in the coming years. If Congress does not extend the 2017 Tax Cuts and Jobs Act, the current exemption may revert to pre-2017 levels—approximately $6.8 million, adjusted for inflation. Advisors should remain vigilant, guiding clients to capitalize on today’s elevated exemptions before potential reductions.
Exploring GRATs for Tax-Efficient Wealth Transfer
For clients who have maximized their lifetime exemptions but wish to continue wealth transfers, grantor retained annuity trusts (GRATs) are a viable option. GRATs allow individuals to transfer assets into a trust and receive annuity payments over a specified term, often two to five years. Any growth beyond the IRS-set hurdle rate passes to beneficiaries free of gift and estate taxes.
Evan Rothschild, senior wealth advisor at Focus Partners Wealth, explains, “A GRAT functions like a loan to a trust, using assets—often stock—instead of cash.”
Although GRATs are most effective when interest rates are low, the strategy remains relevant even in a higher-rate environment. The key lies in using assets with depressed valuations, increasing the likelihood of surpassing the hurdle rate.
Dos Santos adds, “Depressed assets provide a lower starting point, and any rebound amplifies the GRAT’s potential success.”
Advisors should caution clients, however, that GRATs are irrevocable. Once assets are transferred, they cannot be reclaimed, necessitating thorough planning and client understanding.
Simplifying Strategies for High-Net-Worth Clients
Not all estate-planning strategies require intricate mechanisms. For example, Dos Santos worked with a 90-year-old client who converted a $5 million traditional IRA into a Roth IRA during a market dip. This move reduced the client’s taxable estate by paying taxes on the conversion upfront, while ensuring the entirety of the Roth IRA—including post-rebound growth—passed to the client’s heirs tax-free.
“This approach is particularly relevant for older clients with sizable estates,” Dos Santos explains.
Navigating Volatility with Precision
Estate planning during volatile markets demands agility and foresight. By reframing market dips as opportunities and leveraging tools like GRATs, trusts, and strategic Roth IRA conversions, advisors can guide clients toward tax-efficient wealth transfers that maximize future returns.
For RIAs and wealth advisors, this is a moment to demonstrate value through informed, proactive planning that capitalizes on uncertainty to build lasting legacies.
