If you created an estate plan that includes a living trust, you must review it to determine if it contains language that could create unnecessary cost, effort and stress for your surviving spouse.
Back in the day, when the estate tax exemption was $675,000 to $1,000,000, most living trusts were drafted to provide for a mandatory split of trust assets upon the death of the first spouse.
This was done to ensure that the full estate tax exemption was used and unnecessary estate taxes were avoided.
A split of the trust assets is still appropriate in certain circumstances, but not for the same reasons, and currently, it would not be handled in the same way.
For example, if you are in a second marriage, with children from a prior marriage, you are likely to want a split of trust assets at the first death. This ensures that the surviving spouse can use the assets of the first spouse to die during his or her life, but that the remaining assets after the death of the surviving spouse return to the children of the deceased spouse and are not diverted to a new spouse or children from a new marriage.
However, if you are in a first marriage situation, all children are from the current marriage and no additional children are likely, splitting the assets at the death of the first spouse adds significant cost and unnecessary complexity.
So, what can you do to make sure your trust still meets your needs? Have it reviewed!
First and foremost, read through your trust document to see if it includes this language:
"A pecuniary amount equal to the maximum marital deduction allowable for determining the federal estate tax payable because of the death of the Deceased Spouse reduced by the final federal estate tax values of all property interests that qualify to satisfy the marital deduction and that pass or have passed to or in trust for the Surviving Spouse, other than property interests that pass by virtue of this provision.
If, after allowing for the unified credit which has not been claimed by the Deceased Spouse for transfers made during the life of the Deceased Spouse, the amount described above is more than is necessary to eliminate any federal estate tax with respect to the estate of the Deceased Spouse, then the above described amount will be reduced by the amount needed to increase the taxable estate of the Deceased Spouse to the largest amount which will result in no federal estate tax being imposed on the estate of the Deceased Spouse.
This amount shall vest immediately on the death of the Deceased Spouse and shall be satisfied by the Trustee in cash, or in kind, or partly in each, with assets of the Deceased Spouse contributed or added to the trust and eligible for the marital deduction. The assets allocated in kind shall be considered to satisfy this amount on the basis of their values at the date or dates of the allocation to the Survivor's Trust."
If it includes any language like this, call us. We can ensure your trust meets the needs of your family. Otherwise, you may have a plan in place that leaves your family worse off after you die or in the event that you become incapacitated.
Estate planning isn’t a set it and forget it practice. It’s a living process that supports you in making financial, legal and personal decisions that are right for you, throughout your lifetime. Quality of life is improved when you face your death with honesty, knowing you will leave the world a better place.
If you’re ready to review your estate plan, we have a 50-point do-it-yourself review checklist available. We also invite you to come into our office for a full plan check-up. Simply call us and
mention this article and we can discuss your options. You can reach us at (650) 761 0992.
Like what you're learning?
Sign up for our free newsletter
Notes from the Chief Counsel's Desk
and get more legal insights sent directly to your inbox.
Sign up for our free educational event on
Legal Life Planning
to learn how you can protect your loved ones and assets when something happens to you.
This article is a service of Sky Unlimited Legal Advisory PC, Family Startup Lawyer™. We don't just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you've ever been before, and make all the best choices for the people you love. You can begin by calling our office at (650) 761-0992 today or book online to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.
The strategies that are appropriate for protecting your assets are different for every family. Check out our proven process that gives you peace of mind...