How to turn today’s volatile markets to your advantage

When you gift securities at lower values, you effectively transfer more future appreciation out of your estate, lowering your estate’s tax burden. For example, a gift of an asset recently worth $1 million that has declined to $860,000 could appreciate outside your estate, benefiting your heirs without incurring additional estate taxes.

“Gifting on the dips” allows you to maximize the value you transfer while using less of your lifetime gift exclusion, currently $13.99 million for 2025.¹ (Just be sure not to gift assets whose cost is less than their current fair market value. In those cases, it’s generally best to sell the asset, realize the loss and gift the proceeds.)

In today’s volatile markets, wealth transfer strategies can be particularly advantageous. Two types of irrevocable trusts—the grantor retained annuity trust (GRAT) and the spousal lifetime access trust (SLAT)—present ways to embed tax-efficient planning into your wealth management plan.

Here’s how:

A GRAT allows you to transfer an asset’s future appreciation to beneficiaries with minimal gift tax implications. We think it’s a strategic move during market downturns, as gifting assets at lower values may provide for a much higher wealth transfer opportunity when markets rebound.

GRATs are especially effective with “beaten up” (significantly undervalued) assets that are likely to offer high appreciation potential. Any appreciation beyond the IRS Section 7520 hurdle rate² (5.0% for April 2025) would pass to beneficiaries income- and gift-tax-free. This can be particularly beneficial if you anticipate a market rebound.

Over the life of a GRAT, in most cases no more than five years, the grantor (the one who gives) receives annual payments. Typically, the present value of those payments—which is computed using the 7520 rate—equals the amount gifted to the GRAT. In those situations, the value of the gift from grantor to the GRAT’s beneficiaries is zero. Any assets remaining after these payments are made pass to your beneficiaries tax-free. 

As with the GRAT, it helps to gift assets likely to appreciate to a SLAT. The SLAT also minimizes future estate tax consequences. Typically, a mix of higher-returning equities are used to maximize future appreciation potential.

For 2025, you can gift up to $13.99 million into a SLAT without paying gift tax. Acting during market volatility could be extremely timely (as noted, this exclusion is scheduled to be cut in roughly half as of January 1, 2026). 

A SLAT provides flexibility by allowing distributions to a spouse, and then from the spouse to the grantor, but distributions from a SLAT should only be taken as a last resort.³

While the conversion is taxable,⁴ future growth (on a market rebound) and future distributions would be tax-free. That could be a significant benefit to your heirs and possibly to you, depending on personal circumstances.

Consider a conversion if it’s likely you won’t need your traditional IRA for personal consumption, and if you have assets outside the IRA to cover conversion taxes.⁵ (Be mindful of state taxes, as they can affect the overall tax burden.⁶)

Converting is particularly appropriate if you anticipate being in a higher tax bracket in the future and/or if you do not intend your IRA for charity. With the top ordinary income tax bracket⁷ set to increase in 2026, now is a good time to evaluate your options with a tax advisor.

Roth IRAs do not require minimum distributions, as traditional IRAs do,⁸ making them ideal for those with a longer time horizon. Roth conversion could be especially beneficial in the event your heirs face higher tax rates.

Tax efficiency is maximized if you are able to pay the taxes due on conversion from a source other than the assets in the IRA itself. Conversions can’t be undone: Once a traditional IRA is converted to a Roth, that conversion cannot be reversed. Ensure you’re confident in your decision by consulting with tax advisors and modeling potential outcomes.

By the way, a Roth conversion need not be all or nothing. You can convert in stages. 

We are also discussing many other ideas with clients. They include:

• Moving asset location to enhance balance sheet efficiency
• Exercising and holding stock options if you are still bullish on the stock
• Tax-loss harvesting, which can slice tax bills by using capital losses to maximum advantage

Market declines offer the chance to rethink your asset mix and plans, and to tap these and many other smart planning techniques. Take it step by step and prioritize what works for you—making sure any decision is aligned with your long-term goals.

All of these decisions should be anchored in your financial journey with a customized plan for your wealth. Our proprietary process crafts a bespoke plan for today and a framework for the future, adapting as your life evolves (tapping our Long-Term Capital Market Assumptions, which are 10-to-15-year forecasts for over 200 asset classes that can help, and guide, strategic portfolio decisions). 

Leveraging our analytics, a wealth plan allows clients to pre-experience strategic allocation comparisons, stress test different spending levels and explore gifting opportunities, all while keeping short-, intermediate- and long-term goals in focus.

And today’s market volatility makes it an appropriate time.