Impact of Current Market Conditions on Valuations for Estate Planning

Schneider Downs has recently written about general estate planning strategies in this volatile market, but this article will focus more on the impact on valuations

During this difficult time, we at Schneider Downs hope for the safety and good health of everyone in the communities we serve and elsewhere.

Although it may not be ideal to sell a business at this time, there could be an opportunity to gift ownership in your company. Donors can lower their estate tax burden by gifting during a time when the value of their company has declined.

The stock market is currently in a highly volatile state which creates significant investment risk since, historically, higher volatility results in lower returns. As shown in the chart below, the Chicago Board Options Exchange's Volatility Index (“VIX”), a popular measure of the stock market's expectation of volatility based on S&P 500 index options, jumped in mid-March. Specifically, the index reached an adjusted close of $82.69 on March 16, 2020 following the CDC’s warning against large gatherings issued the day prior. For perspective, the index peaked at an adjusted close of $80.86 during the Great Recession in 2008. The VIX has since declined to $53.73 as of the writing of this article.


Higher volatility is often one of the many factors that can lead to lower valuations. The chart below indicates that market capitalizations for public companies across all sectors have declined by approximately 25% to 55%, depending on the sector, in the past month:

Source: Fidelity

This increased volatility and lower market capitalizations in the public markets indicate lower valuations for privately held companies as well and could be an advantageous time for estate planning.

However, no one has a clear view of what the economy will look like tomorrow or how long the decreased valuations may last. At this point in time, it may make sense to consider the tax benefits that a lower valuation would provide as part of your overall estate plan.

Schneider Downs has significant experience in preparing business valuations for gift and estate tax, financial reporting, buying/selling and a range of other purposes. Please contact Steve Thimons (412-697-5281; [email protected]) or Thomas D. Pratt (412-697-5615; [email protected]) for more information about our business valuation services.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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