Most, if not all of us, are feeling the need to tighten our belts in the current economic climate. If we have recently bought a home or borrowed against our existing one, we may be “upside down” on our loan. Perhaps you simply are less wealthy as you see equity in your home or the value of your 401(k) and IRA dwindle. Despite the feeling that our belts are getting tighter, the new economic climate is the appropriate time to review and be sure your estate plan still makes sense. Just because the economy has taken a nosedive does not mean you get away with putting your long-term estate planning on the shelf.

Just as you see yourself cutting costs in your day-to-day lifestyle (shortening or canceling vacations, clipping coupons, eating out less, driving at the speed limit to save gas), you can take steps to cut costs that your estate might face if you neglect to plan properly. Most of these tips apply in economic boom times just as equally as they do in economic gloom times.

Though you might be gone when the time comes to administer your estate, your loved ones will still be here to clean up the mess. If you take the right approach while you still can, you can tidy up that mess and prevent most of your assets from the probate process which can tie up your money and property for an extended period of time, causing headache on top of heartache for your surviving heirs. To make matters worse, if you are the primary source of income for your family, your accounts might be frozen after your death, making it very difficult for your loved ones to handle their own affairs.

One way to eliminate the concern over how your surviving spouse, partner, or children will pay the bills (or how they will survive at all, given the massive decline in many of our retirement accounts) is through a life insurance policy. If you’re in a marriage or long-term relationship, chances are you own your home jointly. However, if the house is mortgaged, your survivor will still be on the hook to make the payments. Purchase enough life insurance to cover the balance of the mortgage, and what is most likely your largest purchase (and therefore your largest expense) can be paid off as soon as the insurance pays out.

If you have a revocable trust, are all of your assets included in it? If you purchased a new home or vacation property after forming your trust, be sure the deed shows the trust as the owner. Keep in mind that a trust can help you avoid probate for most of your assets, but it is difficult to avoid it entirely. And avoiding probate does not mean avoiding taxes, necessarily. Your goal in avoiding probate should be to avoid headache, not your legal duty to pay taxes.

To that end, check the beneficiary designations on your retirement plans and brokerage accounts. If you were recently married, divorced, or had a child, this is very important. It is most likely that you do not want to see your
nest egg go to your remarried ex-spouse or partner, nor do you want to neglect one or more of your children.

Review your will, as well. Are there any specific gifts that you have made to a loved one that no longer exist or that have severely depreciated? If to produce extra cash in this economy, you sold that 1963 Corvette that you left to your oldest son in your will, he will not receive any other gift in its place unless you make a revision to your will. Do your current assets still suit your plans for distributing your estate? If you thought your husband would have enough money of his own to live on after you were gone and decided to leave your kids all your brokerage holdings, does that plan still hold water? Or is it time to reconsider?

Now what about those stocks that you have owned for more than a year that have actually made you money despite the doom and gloom on Wall Street? Many investment analysts and economists believe that the capital gains rate on investments will go up in the near future. If you sell off those stocks now and pay the current 15% capital gains rate (rate for married couples who earn between $80,001 and $496,600; single filers who earn between $40,001 and $441,500 ) , you will avoid paying an increased rate in the future. Sell now and take full advantage of the opportunity to offset capital gains with other deductions that are still at your disposal.

If, on the other hand, you have stocks that have lost you money, consider gifting those to loved ones. You can gift up to $16,000 ($32,000 if you are married) to a loved one without paying gift taxes. If you do this with a stock worth $6.00 per share today, and the stock goes up to $12.00 in April, you have effectively made a gift worth twice as much without owing any tax.

Whether you already have an estate plan or have been putting it off, there is no time like the present to evaluate what you have and how you want it to be distributed after you are no longer here. If history is any indicator (and it is), the market will be back and you will be glad to have put the matter of planning your estate behind you.