Is your estate plan or lack of an estate plan a trap for your family? Is it going to be expensive and aggravating for your family after your have passed away when life is already miserable? Let me show you how to save yourself and your family significant time and money for a lot less than going with your current “plan” talking with a professional, preferably an attorney who can draft or redraft documents
As an Accredited Estate Planner, I review a lot of estate plans. One of the most popular estate plans for wealthy clients prior to 2011 placed part of a deceased spouse’s estate in an irrevocable “bypass” or “credit shelter” trust when the first spouse dies. This strategy was designed to keep those assets from adding to the surviving spouse’s estate where it might be exposed it to a higher estate tax. However, these days, 99% of taxpayers have no need for such trusts since the lifetime estate and gift tax exemption per couple is ($11,580,000).
In general, funding a credit shelter trust at the first spouse’s death is a disaster. It is expensive and inconvenient to operate. Typically the trust has a separate trustee. It is a separate irrevocable taxable entity requiring a separate tax return and tax ID number. It deprives the surviving spouse of control. It has the highest tax rate at the lowest taxable income level of any taxable entity. It can increase capital gains in the spouse’s heirs.
If you have a will or trust that provides for a credit shelter trust, NOW is the time to remedy the situation. If you already have a credit shelter trust, Tennessee has laws under which, with professional help, you can eliminate these trusts even if you are deceased. An improved estate planning document can be much simpler and qualify for lower taxes. The assets can receive an increase in “cost” (stepped up basis) upon the surviving spouse’s death.
My Advice: This article is the tip of the iceberg. It is almost always painless to have your will, trust, and other estate planning documents reviewed. I offer a free ½ hour consultation that will get you started.