Client focused | Community minded

Great time to Review Your Current Estate Plan

As most people have heard, Congress cobbled together new rules regarding the estate and gift tax that will be in place for a whopping two years. Despite the obvious tenuousness associated with laws in place for only two years, the general consensus is that congress is unable to take away that which it has bestowed. So, while there may be permutations to the estate and gift tax, and possibly some exciting wrinkles providing yours truly with even more job security, the $5,000,000 exemption per person and $10,000,000 exemption per couple capable of being used in full on the second death will likely remain.

Why, then, is it high time to review your estate plans? The AB Trust has slowly waded its way into the common parlance of our times. This is because it has been practitioners’ favored trust structure for many years. Basically, an AB trust provides that upon the first death, in addition to the survivor’s share continuing in a revocable trust (generally referred to as the survivor’s trust) an irrevocable trust holding the deceased spouse’s ½ of community property and separate property in an amount not exceeding the applicable exemption amount is set up for the benefit of the spouse and remainder beneficiaries. Without a doubt, the main ingredient to the AB trusts’ success was the absolute certainty that a married couple would take full advantage of the available exemption. However, pursuant to one of Congress’s more beneficent acts, a surviving spouse is fully capable of utilizing any or all of a deceased spouse’s exemption not utilized upon the first death.

Now, this does not mean that all people should run out and delete the B trust from their family AB trust. Depending on circumstances, plenty of reasons will still militate utilizing an AB trust structure. Having said that, however, families wanting the greatest amount of flexibility built in to their estate plan should certainly have their trust reviewed by a professional so the utility of retaining a B trust can be fully vetted. If, after such a review, the B trust’s added compliance and administrative requirements do not outweigh its remaining benefits, it can be left in place. If, however, the B trust appears more cumbersome than useful given the new laws, modifications can be made to make the B trust a choice versus a mandate for the surviving spouse.

Share this Article

Skip to content