Numerous life events may require you to make changes to your estate plan. However, external factors could also impact your estate plan. This blog by our Morristown estate planning attorneys discusses how inflation is changing estate planning strategies in New Jersey.
What Is Inflation?
Inflation is the increase in the prices of goods and services over time. It is not measured by an increase in the cost of one or a few products. It is an overall increase in goods and services in the economy. Common causes of inflation are the disruption in supply chains, an imbalance between supply and demand, and expectations of inflation.
Inflation reduces the purchasing power of some consumers. It can also raise interest rates, making borrowing money more costly. Because of inflation, investments need to grow faster than inflation to maintain financial wealth for retirement and estate plans.
How Does Inflation Impact Estate Planning in New Jersey?
As inflation increases, the assets in your estate plan may decrease in real value because of the higher cost of goods and services. Another issue of concern is estate taxes. If the inflation-adjusted value of the estate increases, it could result in the estate owing more estate taxes.
Ways that you can try to protect your estate plan and retirement from the impacts of inflation include, but are not limited to:
Regular Reviews of Your Estate Plan
Reviewing your estate plan after major life events, such as births, marriages, divorces, and deaths, is essential. It is equally important to review estate plans periodically, even if you have not experienced significant life changes.
Updates to your estate plan can help you adjust for the impact of inflation over time. You also ensure that your estate plan continues to meet your financial goals for retirement and your wishes for your estate. A skilled estate planning lawyer can help you determine if moving assets to a trust or gifting assets to loved ones during your lifetime may benefit your overall estate plan.
Diversify Investments
Work with your financial advisors to diversify investments to protect assets. Inflation is a reality. Financial professionals plan for increases in inflation and other events that can impact investments. If you do not have a financial advisor, you may want to consider speaking with one to determine if your investments need adjustments, given the rise in inflation.
You may also want to consider adding assets to your estate plan that grow over time. Some assets increase in value during periods of higher inflation. Working with your financial planner and an estate planning attorney can help you develop a strategic plan to reduce the risk of incurring estate taxes, which decreases the amount left to your loved ones.
Modifications in Cost-of-Living Strategies
You may need to adjust your future spending strategies to account for inflation. Adjusting spending now can help you preserve assets for retirement and your legacy for future generations.
Schedule a Consultation With Our Morristown Estate Planning Attorneys
Protecting your estate and loved ones requires a comprehensive estate plan. Changes in the economy may impact various elements of an estate plan. Call E.A. Goodman Law, LLC, to speak with an experienced Morristown estate planning attorney to discuss how inflation could impact your estate plan.
Posted in: Estate Planning