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Estate Planning 2016 and Beyond

No new estate legislation has been passed since American Taxpayer Relief Act of 2012 (“ATRA”). The main effect of ATRA was that the combined Estate Tax/Gift Tax Exemption was raised to $5 Million, with an annual inflation adjustment (it is $5.45M in 2016); The Estate Tax rate was “permanently” set at 39.6%; The Estate Tax Exemption was made “portable” between spouses.“Portability” of the exemption simplified estate planning, allowing unused portions of the exemption available to the first spouse to die (“decedent spouse”) to be used by the “surviving spouse”. This eliminating the need for complex trust arrangements, such as the bypass trust/ credit shelter trust which were aimed at “using” the decedent spouse’s exemption. The Generation Skipping Tax rate and exemption amount were set at the same levels as the Estate Tax Exclusion/Gift Tax Exemption, but are not subject to portability.

However, QTIP, Bypass/Credit Shelter and Disclaimer Trusts still have uses particularly where there are children of a former marriage and/or a chance of remarriage by the surviving spouse – where the power of the surviving trust to make changes should be limited – or where the size of the final estate is unclear at the time the Trust is created. Qualified Domestic Trusts (“QDOT”) are often needed where one spouse is not a citizen of the US. An Asset Protection Trust or Special Needs Trust might be needed where a beneficiary has medical or other issues which make it appropriate to have the assets be controlled by someone else. In the case of larger estates, reducing the size of the estate may be necessary, which can be accomplished by lifetime gifts Insurance Trusts, Charitable Trusts and Grantor Trusts.
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Has Portability Rendered The Bypass Trust Extinct?

Portability allows a surviving spouse to use the “deceased spousal unused exclusion” amount (“DSUE”) of their spouse. This used to be accomplished by use of a “bypass trust”, otherwise known as a “credit shelter trust”, which is now no longer needed for that purpose, in most cases. However, it serves other purposes which should be considered: it can protect the deceased spouses expectations in the case of children of a prior marriage, remarriage of the surviving spouse, and protection from the surviving spouse’s debts. Continue reading

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Estate Planning and the Non-Citizen Spouse

Estate planning for a married couple becomes more complex when one spouse is not a citizen of the US. This is because the unlimited estate tax deduction for transfers between spouses – “the marital deduction”, a cornerstone of estate planning … Continue reading

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When Estate Tax Law Change Is The Only Constant, Keep Your Estate Plan Flexible

As an estate planning attorney, I find it extremely frustrating to not know what the estate tax law will be when my client eventually passes away, since this makes the very idea of “planning” problematic. The window between when an estate … Continue reading

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Lifetime Gifts: Is Massive Gifting Before The End Of 2012 A Good Estate Planning Strategy?

Some estate planners have urged their clients to make large lifetime (inter vivos) gifts to their heirs in 2012, when the current federal gift tax exemption is $5.12M, and the federal gift tax rate is 35%. We don’t know what … Continue reading

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Duties of a Successor Trustee

If a decedent had a properly drafted and funded trust, probate  is generally not required. Unlike a will, a trust is a private document and need not be filed with the probate court. Nonetheless, the successor trustee must still take steps to administer … Continue reading

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Frequently Asked Questions About Probate

1. How long does a California probate proceeding take? A “short” or “summary” probate proceeding can take as little as approximately 30 days. However, not every estate qualifies for the “short” or “summary” probate proceeding. A “full” formal probate proceeding … Continue reading

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California Short Sales And Deficiency Judgments

There are numerous realtors who promise to obtain a short sale for your underwater property, claiming that this will allow you to walk away from the property without further liability, while preserving your creditworthiness.  They tell their clients that California … Continue reading

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Answers About Estate Planning

1. What is estate planning? Estate planning is a process. It involves people—your family, other individuals and, in many cases, charitable organizations of your choice. It also involves your assets (your property) and the various forms of ownership and title … Continue reading

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What Everyone Should Know About Wills

1. What Is a Will? Your will is a legal document in which you give certain instructions to be carried out after your death. For example, you may direct the distribution of your assets (your money and property), and give … Continue reading

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