Planning bequests is a thoughtful act, ensuring your loved ones are provided for, but simply stating a fixed dollar amount today might not hold the same value in the future due to inflation. Failing to account for the eroding power of inflation can significantly diminish the real value of your intended gifts over time, potentially leaving your beneficiaries with less purchasing power than you anticipated. According to the US Bureau of Labor Statistics, the Consumer Price Index (CPI) has historically averaged around 3% annual inflation, but has been significantly higher in recent years, reaching over 9% in 2022. This means a $10,000 bequest intended for 20 years from now could have the purchasing power of only about $5,536.84 if inflation averages 3% annually.
How can I protect my bequests from inflation?
Several strategies can help safeguard your bequests against the effects of inflation. One popular method is to use a percentage-based bequest, rather than a fixed amount. For instance, instead of leaving $50,000, you could leave 10% of your estate. This ensures the beneficiary receives a proportional share, growing or shrinking with the overall estate value. Another approach involves establishing a trust with an inflation adjustment clause. This clause would specify how the bequest amount will be adjusted annually based on a defined inflation index, such as the CPI. These trusts can be complex, requiring careful drafting by an experienced estate planning attorney like Steve Bliss to ensure they function as intended and comply with all applicable laws. Furthermore, assets with inherent inflationary protection, such as real estate or commodities, can be designated as bequests.
What role do trusts play in inflation-adjusted bequests?
Trusts are particularly valuable tools for addressing inflation when planning bequests, offering flexibility and control over how and when assets are distributed. A properly drafted trust can be structured to automatically adjust bequest amounts based on a predetermined inflation rate. For example, a trust could state that each beneficiary receives a fixed amount, adjusted annually by the CPI. This guarantees the real value of the gift is preserved. There are different types of trusts suited for this purpose, including testamentary trusts (created through a will) and living trusts (created during your lifetime). Living trusts offer the added benefit of avoiding probate, which can save time and expense for your beneficiaries. Approximately 60% of Americans do not have an estate plan, potentially leaving their assets vulnerable to inflation and probate costs.
I once knew a man named Arthur, who, a few decades ago, left a fixed bequest of $25,000 to each of his grandchildren in his will.
Arthur, a carpenter by trade, was a man of simple means, and this amount felt generous to him at the time. Years later, when his grandchildren began to receive their bequests, they were understandably disappointed. While $25,000 was a substantial sum decades prior, it barely covered a down payment on a modest home, or even a year of college tuition in the current economic climate. The family felt a sense of sadness, not because Arthur hadn’t cared, but because his good intentions hadn’t anticipated the relentless march of inflation. They had hoped the gift would provide a significant boost, but it ultimately fell short of their expectations, causing some resentment. It was a harsh lesson in the importance of future-proofing estate plans.
Thankfully, my neighbor, Eleanor, a retired teacher, took a different approach.
Eleanor, having witnessed the difficulties faced by Arthur’s grandchildren, consulted with Steve Bliss, an Escondido estate planning attorney. Together, they created a living trust that stipulated each of her grandchildren would receive 15% of her remaining estate after her passing. This percentage-based bequest, combined with a diversified portfolio of assets, ensured that her grandchildren would receive a meaningful inheritance, regardless of economic conditions. Years later, when Eleanor passed away, her estate had grown substantially, and her grandchildren received far more than they would have with a fixed bequest. They were immensely grateful for her foresight, and her legacy continues to provide for their future generations. “A well-planned estate is a gift that keeps on giving,” Eleanor often said, and her story is a testament to that truth.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- estate planning
- bankruptcy attorney
- wills
- family trust
- irrevocable trust
- living trust
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “How do I talk to my family about my estate plan?” Or “What if I live in a different state than where the deceased person lived—does probate still apply?” or “Is a living trust suitable for a small estate? and even: “What property is considered exempt in bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.