Tag Archives: American Taxpayer Relief Act of 2012 (“ATRA”)

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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