3 Estate Planning Strategies That Thrive in Volatile Markets
Learn how GRATs, Roth conversions and gifting let you take advantage of market volatility to transfer wealth to heirs tax-free.
When markets are volatile, your estate can benefit from a refresh. After all, you may think that when the S&P 500, Nasdaq and Dow Jones Industrial Average are heading south, your heirs will inherit less. But it is in those times that opportunities arise, especially if you are looking to transfer more wealth tax-free.
“Assuming that the markets will recover, we are able to transfer a lot of assets outside the estate at discounted dollars,” says Howard Sharfman, senior managing director at NFP Insurance Solutions. “There are many ways to use a temporary dislocation to benefit.”
From gifting to charities and heirs, to engaging in a Roth IRA or Roth 401(K) conversion, here’s how you and your estate can benefit in volatile times.
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Markets are volatile, amp up your gifting
The Internal Revenue Service sets generous limits on how much you can gift tax-free each year. When the market dips, you can maximize that annual allowance by gifting more shares while their value is lower.
“You can give away more assets worth less under the hope they will grow in value,” says David Handler, a partner in the trust and estate group at Kirkland & Ellis. Apple and Nvidia may be struggling today, but that doesn't mean they will still be a few years from now.
Under 2026 IRS rules, you can gift up to $19,000 as an individual or $38,000 as a couple without triggering the gift tax or dipping into your lifetime exemption
You can make as many gifts as you want within those limits. In addition, as of 2026, each person can give up to $15 million during their lifetime (or at death), free of gift and estate tax. When the markets are down, you can gift more stock within the annual tax-free limit.
3 ways to gift assets
There are several ways to gift your heirs more assets, such as an irrevocable trust, a Grantor Retained Annuity Trust (GRAT), or a Donor-Advised Fund (DAF).
1. Irrevocable Trust: It can't be changed or terminated. When the assets are transferred into the trust, you no longer own them. That also means they are no longer considered taxable assets.
2. Grantor Retained Annuity Trust (GRAT): You avoid using the lifetime gift and estate exclusion. Each year, an annuity is paid out for a predetermined period, and the excess is passed on to your heirs gift-tax-free.
Let’s say you own $2 million worth of Tesla shares and believe the stock's slump is short-lived and will reverse in the coming years. You want to transfer that future growth to your heirs and create a two-year GRAT that holds the $2 million in Tesla shares.
The annuity payments you get over the two years will equal the initial value of the gift plus interest at the IRS's assumed growth rate. If the value of the stock in the GRAT rises above the assumed growth rate, that excess return is transferred to your heirs gift-tax-free.
“You have to do it while the value is low,” says Handler. “If the stock market rose 500 points, you missed the opportunity.” Remember that just because a stock is low, there is no guarantee it will go back up. In that scenario, there won’t be anything to pass along to heirs.
3. Donor-Advised Fund (DAF): A DAF is a charitable giving vehicle in which you contribute assets, get a tax deduction, and then have a say in grants going to qualified charities. You can donate stocks, cash, real estate and even cryptocurrency.
Using a DAF, you can donate stocks at a lower price and get a charitable deduction on the current fair market value. If the stock recovers, the assets in the DAF grow tax-free, yielding a larger future gift for the charity.
This strategy only works if your main goal is to give charities something that could potentially appreciate. If you are more focused on the tax deduction, donating when assets are richly valued is a better move.
Roth conversions
A Roth conversion occurs when you move funds from a traditional IRA, 401(K), or 403(b) into a Roth IRA or Roth 401(k). In other words, you are transforming a "traditional" investment into a "Roth" investment.
In a down market, you can convert assets at a lower tax cost because they are worth less and benefit from tax-free growth when markets turn around.
With a Roth IRA or Roth 401(K), contributions are made with after-tax dollars, but withdrawals are tax-free (with some exceptions).
Let’s say you planned to convert $100,000 worth of stocks out of a traditional 401(k) into a Roth 401(k), but when you do the conversion, the value of the stock has fallen to $70,000.
Your taxable conversion amount is 30% lower, and if and when the stock market rebounds, all future gains are tax-free. Plus, with a Roth IRA or Roth 401(k), there are no Required Minimum Distributions (RMDs), meaning your money can grow tax-free for however long you need it to.
“For any clients that have a Roth conversion on the table, now is a great time to consider doing it,” says Will O’Rourke, a financial adviser at Prime Capital Financial. “Roth money is the best thing to travel through an estate.”
Tax loss harvesting
Tax-loss harvesting occurs when you offset gains with losses to reduce your capital gains exposure. Pairing a winning and a losing stock counts as a wash, and there is no capital gains tax.
If your losses exceed the capital gains, you can use up to $3,000 to offset income per year. Losses beyond that can be used in future years. There is one caveat. You can’t repurchase the same or a similar security within thirty days before or after.
To prevent yourself from being out of a stock you love for 30 days in a volatile market, Sharfman says to select another stock to purchase that tends to move the same as the one you sold.
Take AI chipmaker Nvidia for one example. If you use that for tax-loss harvesting and don’t want to wait 30 days, you can purchase shares of, say, Google or Microsoft, which tend to trade with Nvidia.
Don't go it alone
At the end of the day, it’s best to speak with your financial adviser if you have one. While you can DIY estate planning, there are many moving parts and different tax implications based on the strategy you employ.
“No one ever got poor paying for good advice,” said Sharfman. “This is a great area to pay for advice.”
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