Market volatility can be unsettling, but it also presents opportunities to strengthen your financial plan. At Freestone, our goal is to help you navigate such times thoughtfully and proactively.
Below are several key tax, estate, and financial planning strategies that high-net-worth individuals and families can consider during turbulent times. By focusing on these areas, you can turn uncertainty into opportunities and keep your long-term goals on track.
Tax Planning: Tax Loss Harvesting in Volatile Markets
During market downturns, strategic tax-loss harvesting can potentially help you turn lemons into lemonade. By intentionally selling investments that have declined in value, you can potentially realize losses that can offset capital gains and even reduce ordinary income on your tax return. We believe this proactive approach can potentially not only lower your current tax bill but also enhance your portfolio’s long-term tax efficiency. It can be particularly useful if you want to rebalance or diversify your holdings without incurring a large tax hit in the same year. In fact, we implement tax-loss harvesting within our managed equity portfolios, and we believe our clients are already benefiting from this strategy even as markets fluctuate.
Tax Planning: Opportunistic Roth IRA Conversions
A market dip might be an ideal time to consider a Roth IRA conversion. Converting assets from a traditional IRA to a Roth IRA when portfolio values are down means you’ll pay taxes on a lower balance, essentially “on sale.” This opportunistic move can reduce the overall tax impact of the conversion and set you up for more tax-free growth in the future. Over time, having a healthy mix of both pre-tax and after-tax retirement accounts gives you flexibility to manage taxes in retirement. We can help you determine if a Roth conversion during a down market makes sense for your situation.
Estate & Tax Planning: Charitable Giving
Charitable giving is another area where timing and strategy make a big difference. If you anticipate a particularly high-income year, consider making a larger charitable gift in that year to maximize your deduction. Using a donor-advised fund (DAF) for such one-time gifts can be especially effective—you receive the tax deduction up front when you contribute to the DAF, and you can distribute funds to charities over time at your convenience. Additionally, donating appreciated assets (such as stocks that have grown in value) directly to a charity or DAF allows you to avoid capital gains taxes while still claiming a deduction for the full market value of the asset.
On the other hand, if your income is lower this year or your portfolio values are down, you might choose to postpone major charitable contributions to a future year when your income is higher, or your investments have rebounded. By timing major gifts for years when the tax benefit will be greatest, you ensure you’re getting the most impact from your generosity. This way, both the causes you care about, and your overall financial plan benefit more from your giving.
Estate Planning: Gifting Depressed Assets
Market volatility can also create estate planning opportunities. If you feel confident that your own financial goals remain secure despite a market downturn, consider gifting assets while their values are temporarily depressed. By transferring stocks or other assets at a lower valuation, you essentially “freeze” their value for estate purposes and allow any future appreciation to occur outside of your taxable estate. This means you can pass on more to your heirs (or to trusts for their benefit) without using as much of your lifetime gift and estate tax exemption. In other words, you’re able to gift more shares or units when prices are low, potentially sheltering significant growth from future estate taxes. This is especially helpful for clients that live in states that assess estate tax, including Washington and Oregon.
However, if you’re concerned about meeting your own needs in a down market, it’s wise to be more cautious with gifting. You might scale back gifts to only use the annual gift tax exclusion amount (currently $19,000 per donee in 2025) rather than making larger lump-sum gifts. Or you could pause substantial gifting plans entirely until you have more clarity and confidence in your financial situation. The key is to align your gifting strategy with your personal comfort level and financial security. This way, you continue to prioritize your financial independence while still taking advantage of estate planning opportunities where appropriate.
Financial Planning: Monte Carlo Simulation
When markets get choppy, one of the best tools to lean on is your financial plan—specifically, the Monte Carlo simulations in your RightCapital financial plan. If you’re worried about how a market downturn might affect your long-term goals, we can revisit your plan and run an updated Monte Carlo analysis. This type of analysis tests your plan against a wide range of market scenarios, including bear markets and prolonged low-return periods, to calculate the probability of success.
The good news is that if we’ve already done this planning, your current probability of success likely already factors in occasional market volatility. In essence, your plan was built with the understanding that not every year will be a boom year. Seeing those Monte Carlo results can provide peace of mind and help you avoid emotional “fight or flight” reactions. Rather than making drastic changes to your investment strategy during a downturn, you can take comfort that the data-driven plan shows you’re still on track to reach your goals.
Financial Planning: Stress Testing Your Plan
For additional reassurance, we can also stress test your financial plan against extreme scenarios. A stress test is a simplified analysis that shows what might happen if the market takes an even deeper dive or if other adverse conditions hit (for example, a sharp rise in inflation or an increase in your spending). By modeling a severe market drop on paper, you get to see how resilient your plan truly is.
If the projections show that you remain financially secure even after a hypothetical market crash, that’s a strong indicator you’re well-positioned to weather real-world volatility. If the stress test reveals any potential weaknesses, we can address them proactively—perhaps by adjusting spending, reallocating investments, or building up cash reserves—before a worst-case scenario ever unfolds. Either way, the exercise helps replace uncertainty with clarity.
While market downturns are uncomfortable, remember that they are also a normal part of the long-term investing journey. With careful planning and the right strategies in place, you can navigate volatile periods without derailing your progress. Tax-smart moves, thoughtful giving, and rigorous financial plan analysis all work together to keep you moving toward your objectives. As always, you don’t have to go it alone—our team is here to guide you and adjust your plan as needed. By staying focused on your goals and leveraging the strategies above, you can feel confident that you’re doing everything possible to secure your financial future, even when markets are stormy.
Important Disclosures: This article is not intended to provide and you should not rely upon it for accounting, legal, tax, insurance or investment advice or recommendations. This article is intended to be educational in nature and to discuss limited aspects of very complex subject matters. This article is not a comprehensive or complete summary of all considerations regarding its subject. We recognize that every individual has different needs and the opinions expressed in this article may not be appropriate for everyone. Please consult with a Freestone client advisor, insurance provider, accountant, or lawyer regarding options specific to your needs.