New Tax Laws May Make Trusts Unnecessary

Thomas N. Silverman was recently quoted by the Palm Beach Daily News in an article about recently passed tax laws and their affect on trusts.

Article Link on Palm Beach Daily News Website. By Gail Liberman

Just 52 percent of American millionaires have established trusts and/or estate managers, according to a recent survey by PNC Wealth Management. But thanks to the new estate tax law, you might not necessarily need a trust. 

“In fact, we’re starting to see people undo them [trusts],” says Palm Beach Gardens estate planning attorney Thomas Silverman.

One of the most popular types of trusts is a credit shelter trust, which is set up between spouses, often to minimize estate taxes.

Thanks to the recent fiscal cliff deal, this type of trust may prove unnecessary for some.

That’s because estates with at least $5.25 million in assets — $10.50 million for married couples — are exempt from the federal estate tax this year. That exemption is indexed to inflation.

“You can hold property in your own name or it can be joint,” Silverman says.

After the death of the first spouse, a permanent “portability” feature lets the surviving spouse carry over the unused portion of a spouse’s estate tax exemption to expand his or her own exemption. So a will coupled with named beneficiaries on financial accounts to avoid probate may be all that some couples with less than $10.50 million may need.

The federal estate tax runs a maximum of 40 percent on amounts over the exemption — up from 35 percent. Estates of snowbirds, however, also could get saddled with state death taxes.

Already have a credit shelter trust with your spouse? You may need to have it reviewed, Silverman suggests. If your assets were divided among spousal trusts, you could encounter added accounting and administrative headaches and costs you don’t really need.

Due to the estate tax changes, generation-skipping transfer trusts also could prove problematic — especially if you’d like your children to get some assets free of a trust. With the increase in the estate tax exemption, your trust wordage could unwittingly finance your grandchildren’s trust with more money than you’d like.

“Everybody should look at amending (a trust) if it were only set up to save estate taxes,” Silverman says. “It’s one or two hours of a lawyer’s time.”

Of course, there still are many reasons to have a trust.

Do you trust your kids to manage their own assets? Do you have children with disabilities or special needs? Might your assets added to those of your children put them in a higher tax bracket?

In such cases, trusts still could prove important, notes Shelley Cabangon, vice president of PNC Wealth Management.

Are you in a second marriage and want your children to get your assets? Simply naming a spouse as beneficiary, for example, could wind up excluding your children from your money if your surviving spouse selects a different beneficiary.

A trust also can protect family members against lawsuits and divorce, Cabangon says.

“We had some people who could afford to make significant gifts (to avoid the estate tax) but still wanted to hold off because they wanted more certainty,” Cabangon says. “We’re encouraging people to do it now.”

 


If you or a loved one needs help with a situation involving one of these areas, please contact Thomas N. Silverman, P.A. at 561.775.7500 (24 hours) or info@FloridaProbateCounsel.com.

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