Why Should I Gift Depreciated Assets During a Recession?

During a recession (or even a depression), it may seem disheartening to see your portfolio decline in value to a significant degree. However, there may be a silver lining that you can take advantage of. With guidance from an experienced estate planning attorney in Plantation, you may be able to benefit by gifting your depreciated assets. Why is this an effective strategy during an economic downturn?

Lower Asset Values Allow You to Give More Without Exceeding the Lifetime Exemption

If you are planning on giving away assets like stocks, bonds, treasuries, and crypto, it makes sense to do so during an economic downturn. Recessions push asset values down, allowing you to give more without exceeding your lifetime gift tax exemption.

For example, you might have $1,000,000 in an S&P 500 ETF. Suppose a major economic crash occurs, and your position is now worth $800,000. If you were planning on leaving your beneficiaries assets anyway, it makes sense to transfer your stocks to your beneficiary now rather than after the market recovers.

Barring a truly apocalyptic scenario, the market will recover. But by transferring these stocks now rather than later, you give yourself $200,000 more in your lifetime gift tax exemption to use later on.

This Strategy May Only Make Sense for High-Net-Worth Families

While the lifetime gift tax exemption is an important factor to consider, it is not something that most families need to worry about. With the exemption at an all-time high ($15 million per person as of 2026), average families will never be able to exceed this amount. Note that there is no state-level estate or inheritance tax in Florida.

You would only benefit from gifting depreciated assets in this manner if you expect to gift your beneficiaries more than $15 million over the course of your lifetime. For example, you might have $20 million in stocks. In this type of situation, it makes sense to take advantage of market dips whenever possible in an attempt to stay as close to that $15-million level as possible.

By strategically gifting depreciated assets over the course of your life, you may be able to reduce your lifetime gift tax to a considerable degree. Note that your beneficiaries would face capital gains taxes on any “rebounds” during market recoveries. While this saves you from those taxes, it may also become a burden for your loved ones. If they inherit your stocks at the time of your death, the “step-up in basis” may make the family’s capital gains obligations more favorable.

Can an Estate Planning Lawyer in Aventura Help Me?

Although gifting depreciated assets during a recession can help you make the most of a bad economy, it represents only one potential strategy that may be effective in this scenario. The most appropriate strategies probably depend on your unique circumstances, and you can discuss your financial situation during a consultation with a Plantation estate planning lawyer at 411 Probate.

Source:

 irs.gov/newsroom/estate-and-gift-tax-faqs