Estate and Tax Plans

We know that you have specific circumstances, goals and requirements for preserving and transferring your wealth. Our estate planning attorneys will help you set a financial and legal course to effectively direct your own future. Whether you are a business owner wanting to implement succession planning, an individual with newly acquired wealth thinking of your future generations, or a family with significant inherited wealth wanting to preserve it, Chapman Law Group can help.

Changes to federal and state tax laws can affect your long-term financial strategy. Depending on the details of the new legislation, you may need to change your existing plans. Our attorneys stay up-to-date on all tax laws to help you maximize your financial opportunities and achieve your long-term objectives.

How can you take advantage of recent estate tax law to ease stress after the death of your spouse?

We don’t like to talk about the future death of our spouse. We know it will be a very sad time in our lives. Until recently this severe grief was compounded by the stress involved with administering our deceased spouse’s trust, paying debts, addressing taxes and establishing family trusts, which sheltered money from lower estate tax thresholds with higher tax rates. Those family trusts doubled the amount a married couple could maintain tax-free but required year-to-year administration and reviews with estate planning attorneys and accountants to address tax issues. Then Congress passed the American Taxpayers Relief Act of 2012 (ATRA 2012) on January 1, 2013.

Since that date, many clients with trusts have simplified their estate plans and decreased future stress by taking advantage of the “permanent” establishment of the estate and gift tax exemption of $5.25 million per person with a yearly cost of living adjustment (setting the current 2014 exemption at $5.34 million).¹ ATRA 2012 also includes a “portability” provision, allowing the surviving spouse to use the unused portion of the deceased spouse’s estate tax exemption. For example, under the 2014 estate tax exemption, if the first spouse to pass away uses $2 million of his/her $5.34 million exemption, leaving $3.34 million of the exemption unused, upon death, the surviving spouse could add that $3.34 million to his/her exemption (for a total of $8.68 million, using 2014 numbers). The net result of ATRA 2012 is that over 99% of Americans will not be charged taxes on their estates or gifts.

With the higher estate tax exemptions comes the opportunity to simplify your estate plan and eliminate the additional stress of trust administration during the same time you are mourning the death of your spouse. Under ATRA 2012, your future estate administration may be less stressful in two different ways:

• • First, if you are married and you and your spouse have two trusts (proper planning for the prior lower tax exemptions), you now can unify your estate plans into one joint trust. After one spouse passes away, the surviving spouse isn’t faced with administering two trusts (involving payment of creditors, taxes, further financial management, etc.) Instead the surviving spouse continues under the same joint trust, without having to pay additional taxes, accountant fees or legal fees in the year-to-year maintenance of the deceased spouse’s trust.
  • Second, in the alternative, you may eliminate unnecessary and, potentially, costly terms in your current trust plan. The two trust estates created under the lower estate tax regime often contain terms which establish new trusts at death (the aforementioned “family trust” or “credit shelter trust”) and make it more difficult for a surviving spouse to obtain money from the trust of the deceased spouse. Now, these trusts limiting a surviving spouse’s access to money may be unnecessary. As a result, if you eliminate the “family trust” or “credit shelter trust,” you can make sure your surviving spouse will have immediate, unhindered access to your trust funds.

If you are like many married Americans, you can succeed in limiting unnecessary stress and costs in administering your spouse’s estate by acting to unify your estate into a joint trust or eliminate provisions for your restricting subsequent credit shelter trust.