Reviewing Your Estate
Things to Consider
For those married couples with substantial
net worth, attorneys have traditional recommended A/B
planning to help minimize federal estate taxes. A/B
planning meant that at the first spouse's death, the
estate was divided into two parts:
- The marital part, which was treated as going to
the surviving spouse for federal estate tax purposes,
- The bypass part, which was treated as going to
the kids for estate tax purposes.
With proper A/B planning, both the first spouse to
die and the second spouse would have gotten credit for
their estate tax exemptions - essentially doubling the
amount that passed to the kids free from federal estate
Well, the 2010 Tax Act, passed in December, made any
unused federal estate tax exemption at the first spouse's
death portable. The second spouse to die could add the
unused exemption to his or her own exemption, making
the total that can pass estate tax free as high as $10
million. The portable exemption does not require the
kind of special estate planning that the A/B technique
needed. These rules are effective for the next two years.
So is A/B planning still needed? The answer is yes
- Spouses want to earmark certain assets for children
instead of surviving spouse,
- The length of time between spouses' deaths is likely
to be substantial,
- The couple is worried about what changes might
occur in 2013, or
- Spouse or children need protection against creditors.
A/B estate planning may not be needed where
- the couple are in a long-term committed relationship
where the only children belong to both of them,
- they have no real concerns about a possible remarriage
by a surviving spouse,
- the couple intends for their children to be the
primary beneficiaries of the estate when both spouses
- it is overwhelmingly important for the surviving
spouse to maintain full control of all marital assets,
- asset protection concerns are not important.
In light of the changes made by the 2010 Tax Act,
we are strongly recommending that those with sophisticated
estate plans have those plans reviewed.
As always, please feel free to call to discuss these
or other financial security issues of concern.
This information is not intended to be a substitute
for specific individualized tax or legal advice. We
suggest that you discuss your situation with a qualified
tax or legal advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
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