Estate Planning as a Career

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If your estate is worth more than $4,000,000 a simple change in your will can reduce your federal estate tax liability by 50%. The plan is to use what is called an A-B trust. A trust that allows couples to reduce or avoid estate taxes. Each spouse puts his or her property in an AB trust. When the first spouse dies, his or her half of the property goes to the beneficiaries named in the trust. Generally this would be the children of the married couple but many variations exist and there is no limit to how this trust is used in reference to the beneficiaries. The surviving spouse has the right to use the property for life and is entitled to any income it generates. The surviving spouse may even be allowed to spend principal in certain circumstances such as medical care, personal needs or education. When the surviving spouse dies, the property passes to the trust beneficiaries. It is not considered part of the second spouse’s estate for estate tax purposes. The funds are considered a separate asset owned by the trust and sued by the surviving spouse. Using this kind of trust keeps the second spouse’s taxable estate half the size it would be if the property were left directly to the spouse. This type of trust is also known as a bypass or credit shelter trust.

Normally the Credit Shelter Trust is established with the will. It would then become effective at the time of the death of the first spouse. Testamentary Trust means, in essence, a Trust in a Will. Many simple Wills dispose of the assets of the decedent by stating that such assets go “to my surviving spouse; if there is no spouse, then equally to my surviving children.”

If the children are minors, a guardianship will have to be judicially established unless the Will does not appoint a Guardian for the minor children. This simple planning tool allows for the estate tax free transfer of assets to the next generation and at the same time allows the surviving spouse to feel independent financially. As with all important decisions, always consult legal experts before entering into any legally binding agreement.

Bill Broich heps seniors manage their retirement savings. Visit his website for more information: Annuity

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This entry was posted on Thursday, November 15th, 2007 at 2:28 pm and is filed under , Estates, Wills, Trusts, Career Information, Blog Carnival. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.