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How Target Employees Can Benefit from Estate Planning During Market Volatility

'Target employees facing market downturns can leverage strategic estate planning opportunities, such as gifting undervalued assets and using tools like GRATs and Roth IRAs, to mitigate taxes and pass on more wealth to heirs—turning market volatility into an advantage.' – Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement.

'Target employees should view market downturns as an opportunity to reassess their estate planning strategies, using tools like GRATs and Roth IRA conversions to transfer more wealth while mitigating tax liabilities for future generations.' – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

How market downturns can present estate planning opportunities.
The strategic use of tools like GRATs and Roth IRA conversions.
The importance of charitable giving in reducing taxable estates during volatile periods.

Estate planning is often seen as a challenging process, particularly during volatile market conditions. Making decisions with long-term impacts can be difficult when share prices are erratic and future market performance is uncertain. However, careful planning during these volatile periods can lead to better future returns and more efficient asset transfer to successors. While many focus on estate planning during market upswings, some of the most strategic decisions can be made when asset values are declining, particularly for Target employees preparing for retirement.

Estate Planning and Volatility: A Strategic Advantage

Estate planning is often associated with market growth, focusing on transferring assets when prices are high. Yet, when assets are undervalued due to market downturns, significant opportunities often arise. The market's recovery after a sharp drop, like the one in April, shows how volatility can lead to wise decision-making. Future wealth transfers can be optimized by focusing on asset quantity instead of current value, as more shares can be passed on to heirs before gift-tax exemptions are exceeded, which can be an important strategy for Target employees planning their estates.

The concept of moving assets during a market downturn proves to be more beneficial for estate planners than it may initially appear. When asset prices are low, more shares can be transferred before hitting the $19,000 annual federal gift-tax exemption threshold for 2025. This strategy allows heirs to benefit from future growth once the market recovers, providing a valuable option for those at Target looking to optimize their estate planning during volatile times.

This approach is also useful for those aiming to stay under the $14 million per person lifetime federal estate tax exemption. For example, if a business was initially valued at $15 million but is now worth $14 million, a donor can place it in a trust. The tax-free transfer of future expansion to heirs keeps the business outside the donor's estate, a strategy that Target employees could consider when planning for their family's future.

Changes to Gifting Exemptions Affecting Taxes

Though market downturns can provide estate planning benefits, it’s important to remember that estate planning laws are always changing. With Congress debating potential changes to gifting amounts, it’s essential to act while exemptions remain high. If the estate tax exemptions aren't renewed, the exemption may revert to around $6.8 million, adjusted for inflation. This shift could greatly impact wealth transfer plans, so it’s vital for Target employees to take advantage of higher exemption levels while they are still in place.

Exploring Other Estate Planning Strategies

Grantor retained annuity trusts (GRATs) are another option for individuals who have already used their lifetime exemption but still want to reduce wealth transfer taxes. These irrevocable trusts allow individuals to leave assets to their heirs while retaining annuity income for a period. GRATs help mitigate estate taxes on any asset appreciation during the trust's duration, offering an option for Target employees looking to pass on their wealth in a tax-efficient way.

The Internal Revenue Service (IRS) sets the annuity payout rate at 120% of the applicable federal mid-term rate, which is currently 5%. For beneficiaries to profit from additional value, the asset's growth must exceed this hurdle rate. If the asset's growth surpasses this rate, the remaining balance in the trust is distributed to the heirs tax free. Target employees considering this strategy can potentially avoid estate taxes and preserve their wealth from future tax burdens.

Although current interest rates aren't exceptionally low, Dos Santos notes that using undervalued assets in a GRAT may still lead to favorable outcomes. By leveraging lower asset prices, individuals can establish GRATs with a higher chance of surpassing the hurdle rate when the market rebounds, a strategy that could be beneficial for Target employees who want to plan ahead.

A Simpler Approach: Switching to a Roth IRA

Not all estate planning strategies need to be complicated. Sometimes, simpler methods provide significant tax advantages. For instance, a 90-year-old Target employee switched from a $5 million traditional IRA to a Roth IRA during a period of market decline. The client reduced the taxable estate by paying the conversion taxes upfront, and now her son will receive the entire Roth IRA tax-free, along with any future gains.

Dos Santos believes this is a smart strategy, especially for seniors concerned about their taxable estates. By reducing the size of the estate, the Roth IRA allows its full value to be passed on tax-free to future generations, making it a great option for Target employees planning for their heirs.

The Importance of Thoughtful Estate Planning Decisions

Estate planning should be done with care, especially when using irrevocable trusts like GRATs. Once assets are placed in these trusts, they cannot be withdrawn, so individuals must carefully consider their choices. Nevertheless, strategic estate planning presents unique opportunities to pass on more wealth to heirs without incurring unnecessary taxes, particularly during market volatility. Target employees can make the most of these opportunities by strategically planning their estate transfers.

For those looking to efficiently transfer wealth and reduce their taxable estate, current market conditions may present opportunities. Market downturns can provide a tactical advantage, whether through Roth IRA conversions, using the federal estate tax exemption, or establishing GRATs. By focusing on the number of shares rather than current asset values, individuals can position themselves to realize long-term benefits and enable their heirs to inherit the full value of their transferred assets.

In conclusion, volatility is often viewed as a threat to financial stability, but it can actually be an asset when approached strategically. By leveraging low asset values during market downturns, Target employees can potentially increase future returns and build a better future for their heirs.

Tax Benefits of Charitable Giving in Estate Planning

When considering estate planning during volatile market periods, charitable giving offers additional tax benefits. By donating depreciating assets such as stocks or real estate directly to a charity, individuals can reduce their taxable estate and avoid paying capital gains tax on appreciated assets. This tactic not only reduces estate taxes but also allows individuals to give back.

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Sources:

1. Fuscaldo, Donna. 'Markets Are Down: Here's How Your Estate Can Benefit.' Kiplinger , 15 Mar. 2025, www.kiplinger.com . Accessed 26 May 2025.

2. Chmielewski, Paul. 'Estate Planning During Times of Market Volatility.' Cerity Partners , 25 Mar. 2025, www.ceritypartners.com . Accessed 26 May 2025.

3. Kiplinger Staff. 'Eight Ways to Financially Plan Your Way Through Challenging Times.' Kiplinger , 24 May 2025, www.kiplinger.com . Accessed 26 May 2025.

4. Kotlikoff, Laurence. 'This Move Can Save You Tons on Taxes in Retirement. It's Best to Go Big.' Barron's , 25 May 2025, www.barrons.com . Accessed 26 May 2025.

5. Branton, Steve. 'How Sequence of Returns Risk Could Affect Your Retirement—And What HNW Investors Should Do.' Investopedia , 25 May 2025, www.investopedia.com . Accessed 26 May 2025.

What are the key benefits provided by Target Corporation's Personal Pension Account and Traditional Plan for employees approaching retirement, and how do these plans ensure financial security during retirement years? Understanding the synergy between these two plans is essential for retirees, as they work together alongside Social Security and personal savings to replace a portion of an employee's paycheck after retirement.

Key Benefits of the Personal Pension Account and Traditional Plan: Target Corporation's pension plan includes two components: the Personal Pension Account and the Traditional Plan. These plans work in tandem to replace a portion of an employee's paycheck during retirement. The Personal Pension Account provides pay credits and interest that accumulate over time, while the Traditional Plan uses a final average pay formula. Together with Social Security and personal savings, these plans help ensure financial security in retirement(Target Corporation_Dece…).

How can employees elect different payment options, such as the Single Life Annuity or the Joint and Survivor Annuities, within Target Corporation's pension plans? It is crucial for employees to grasp not only the financial implications of these choices but also the necessary spousal consent required when designating a joint annuitant, particularly if the chosen joint annuitant is not the employee's spouse.

Payment Options and Spousal Consent: Employees can elect different payment options, including the Single Life Annuity, which provides the highest monthly benefit and ceases at the retiree’s death, or the Joint and Survivor Annuity, which continues payments to a surviving spouse. To elect a non-spouse as a joint annuitant, spousal consent is required, and this must be notarized to ensure compliance with plan rules(Target Corporation_Dece…).

In what circumstances might benefits not be paid under the Traditional Plan, and what steps can employees take to ensure they remain eligible for their pension benefits upon termination of employment? Target Corporation's policy outlines several scenarios where benefits could be denied, making it necessary for employees to be proactive in understanding their rights and responsibilities concerning plan participation.

Circumstances for Denial of Benefits under the Traditional Plan: Benefits under the Traditional Plan may not be paid if an employee leaves before becoming vested (less than three years of service). Employees should ensure they meet the vesting requirements and maintain eligibility by avoiding termination before they reach the minimum service period(Target Corporation_Dece…).

What procedures should employees follow to report changes in marital status, address, or beneficiaries to ensure compliance with the requirements of Target Corporation's pension plan? Employees must understand the importance of timely reporting these changes to avoid potential issues with their retirement benefits and ensure that their pension plan information remains up-to-date.

Reporting Changes in Marital Status or Beneficiaries: Employees must promptly report changes in marital status, address, or beneficiaries to Target's Benefits Center to ensure their pension records remain up-to-date. Failing to do so can lead to delays or issues in processing pension benefits(Target Corporation_Dece…).

How does Target Corporation determine the final average pay used to calculate retirement benefits under its pension plans, and what factors may affect this calculation? Employees nearing retirement should be fully informed about how their compensation is considered in determining their pension benefits, including aspects such as bonuses and overtime that may influence their final average pay calculation.

Final Average Pay Calculation: Target Corporation calculates final average pay based on the five highest years of earnings out of the last 10 years of service. This includes regular pay, overtime, bonuses, and commissions but excludes items like workers' compensation or long-term disability payments(Target Corporation_Dece…).

How can employees begin the process of rolling over their Target 401(k) accounts into the Pension Plan, and what advantages does this Pension Purchase Program offer? Understanding this rollover option is vital for maximizing retirement benefits, as it can provide employees with a stable income stream while avoiding unnecessary fees typically associated with purchasing annuities outside the plan.

Rolling Over 401(k) into the Pension Plan: Employees can roll over their 401(k) accounts into the Pension Plan using the Pension Purchase Program. This option offers several advantages, including avoiding fees associated with purchasing annuities outside the plan and receiving a stable income stream during retirement(Target Corporation_Dece…).

What are the implications of a participant's age and joint annuitant's age on the payment amounts under the various Joint and Survivor Annuity options at Target Corporation? Employees should be aware of how age differences can impact their pension payouts, as the specific percentages payable under these options may vary based on the ages of both the participant and their designated joint annuitant.

Effect of Participant and Joint Annuitant’s Age on Payments: The Joint and Survivor Annuity options are influenced by the ages of both the participant and the joint annuitant. The younger the joint annuitant, the lower the monthly payout due to actuarial adjustments. Employees should consider these factors when selecting an annuity option(Target Corporation_Dece…).

How are retirement benefits managed during potential plan terminations or amendments at Target Corporation, and what protections are in place for employees in these scenarios? Employees should be well-informed regarding their rights in the event of changes to the pension plan, including how benefits would be distributed and under what circumstances they may remain fully vested.

Plan Terminations or Amendments: In case of plan terminations or amendments, vested benefits are protected, and employees will receive their earned pension. If the plan is amended or terminated, Target ensures that vested benefits are distributed according to the plan's terms(Target Corporation_Dece…).

For employees retiring or leaving Target Corporation, what options are available with respect to unused vacation time and how might this be factored into pension calculations? Understanding how accrued time off translates into benefits could have a significant impact on an employee's financial positioning upon retirement.

Unused Vacation Time and Pension Calculations: Unused vacation time does not directly affect pension benefits but can be included in eligible earnings calculations that determine final average pay. Employees nearing retirement should consult with Target’s Benefits Center to understand how unused time may impact their overall benefits(Target Corporation_Dece…).

How can employees contact Target Corporation for assistance with their retirement benefits to address any questions or concerns they may have about their pension plans? Accessing the right resources and support is essential for employees to navigate their retirement benefits effectively. They can reach out to the Target Benefits Center at 800-828-5850 for more specific inquiries related to their personal circumstances. These questions aim to enhance employees' understanding of their retirement benefits, ensuring they are well-prepared for their transition into retirement.

Contacting Target for Pension Assistance: Employees can contact the Target Benefits Center at 800-828-5850 for assistance with their retirement and pension plans. This center provides support with any questions related to pension options, payments, and administrative requirements(Target Corporation_Dece…).

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For more information you can reach the plan administrator for Target at 10 South Dearborn Street 48th Floor Chicago, IL 60603; or by calling them at 1-800-440-0680.