Category Archives: Wills & Trusts
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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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 →
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 →
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 →
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 →
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (“TRUIRJCA” or “TRA 2010″ for short) was signed into law on December 17, 2010. It was a compromise bill and, as such, it suffers from two major defects: it leaves … Continue reading →
By itself, having a living trust document drafted and notarized will not effectuate the beneficial intentions of your estate plan. The problem is that a living trust will only accomplish your goals if you properly “fund” it. You have to … Continue reading →
For many Americans, pets are more like a family member than a piece of property. Yet, more than 500,000 pets are euthanized in the U.S. each year because owners die or become incapacitated. The law treats pets as mere property, … Continue reading →