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New law may impact estate planning

Readers of this blog may know that a certain value of their assets is exempt from estate tax. An estate attorney would refer to this value as the exclusion amount. In 2014, that amount is $5,340,000. 

Yet there may be other tax implications or concerns involving the inheritance. In addition, the exclusion amount may not cover all the property within a high asset estate. These and other reasons explain the popularity of trusts. 

Readers may know that a will can be drafted at any time. However, some may have questions about whether certain types of trusts can be set up during a person’s lifetime. The answer is yes. Although some trusts are formed at a donor’s death, such as a testamentary trust set up under a donor’s will, other trusts are available during a donor’s lifetime. For example, an inter vivos, or living trust can be created while both spouses are alive. 

Individuals may have a variety of assets, such as retirement accounts, life insurance policies, and personal and real property. In addition, a spouse may have acquired property before a marriage that is not part of the marital estate, and consequently may not transfer to the surviving spouse with the same tax-free implications ass jointly owned property would. These suggest reasons for credit shelter trusts, a type of estate planning instrument designed to maximize an individual’s exclusion amount.

Yet according to some commentators, a new development in transfer tax laws may impact credit shelter trusts. Called the American Tax Relief Act of 2012, the act made certain transfer tax provisions from former President George W. Bush’s era an official part of estate law. Fortunately, an attorney that specializes in estate law may have suggestions for making the most of the new provisions in an individual’s estate planning.

Source: Forbes, “Planning for Married Couples After ATRA -- Part I,” Lewis Saret, March 18, 2014

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