Tuesday, August 6, 2013
As I have previously discussed, recently Congress passed the American Tax Relief Act of 2012, or “ATRA”. The Act affects only already existing provisions, but has many new tax implications. Some of the provisions included in the act will positively affect estate planning. One of the areas affected by the Act is the maximum estate, gift and GST tax rate. The rate is now permanently set at 40%, which occurs on taxable estate worth more than $5,250,000. Roughly .33 percent can take advantage of these high exclusions that have not yet been repealed.
The other 99.67 percent should consider choosing between simplicity or asset protection when planning their estates. Those interested in convenience and no oversight should not use a trust/bypass trust combination. Instead, those who are focused on simplicity should use a survivor's trust. Advisor's should look for mandatory distributions to bypass trusts based on tax exemptions.
Although Bypass trusts are more complicated, they offer some advantages. Bypass trusts offer creditor protection because of the trusts irrevocable nature. Additionally, it offers clients remarriage protection. When a spouse dies his or her trust property is still subject to their control even after the second spouse dies.
See Randy Gardner,Leslie Daff, Lew Dymond, Julie Welch, The New Estate Planning Dilemma: Simplicity or Asset Protection?, Journal of Financial Planning Jun. 1, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.