Between the fluctuating stock market and declining home values, the value of your assets has probably changed dramatically over the past couple of years. Thus, you should probably take a look at your estate plan, considering the following:

• Take another look at your plans for distributing your estate. Your estate plan may distribute specific assets to specific heirs, such as a business to one child and investments to another child. While those assets may have been equal in value in the past, that may have changed. You may want to place provisions in your estate plan to equalize distributions.
• Review amounts being placed in different trusts. Many estate planning documents indicate that trusts should be funded with assets equal to the exemption amount or the generation-skipping transfer tax exemption amount. Lower asset values coupled with significantly larger exemption amounts could result in placing too large a percentage of your estate into trusts.
• Use lower asset values to leverage your lifetime gifting strategies. In 2009, you can gift up to $13,000 ($26,000 if the gift is split with your spouse) to any individual free of gift taxes. The amount will be the same in 2010. You can also gift up to $1,000,000 during your lifetime without paying gift taxes. When asset values are low, you might want to gift some of those assets to your heirs. There are other strategies to leverage gifts, such as setting up trusts that discount the value of the gift and using family limited partnerships or limited liability companies.
• Consider converting traditional individual retirement accounts (IRAs) to Roth IRAs. While your adjusted gross income cannot exceed $100,000 in 2009 to convert, anyone can convert next year. Amounts rolled over from a qualified pension plan, such as a 401(k) plan, to a traditional IRA can also be converted to a Roth IRA. Transferred amounts must be included in income if they would be taxable when withdrawn (e.g., contributions and earnings in traditional IRAs and earnings in nondeductible IRAs), but are exempt from the 10% federal tax penalty. While there are many factors to consider before converting, a major factor is the ability to pay the income taxes with funds outside the IRA. With lower investment values, your tax bill will be lower also. Once the IRA is converted to a Roth IRA, qualified distributions, whether taken by you or your heirs, will be received on a tax-free basis.

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