Married Couples Affected By New Estate Environment

by

Rowel Manasan

Because of a Congressional failure to act before the end of 2009, there s good news and bad news to report on the Estate Planning front.

The good news is there s no Estate Tax if you die this year. The bad news is, that you may owe significant capital gains taxes if a loved one dies this year and leaves you significant appreciated assets. If you have total assets of around $1 million or more (including face value of life insurance, retirement plans, home equity, etc.) you should make sure their estate plan is up to date.

Congress has had nine years to prevent this from happening, but has failed to act.

Under the provisions of a Bush-era tax-cut bill enacted in 2001, the estate tax exemption has been gradually raised over the past eight years, while the tax rate on estates has been reduced.

For estates of those dying in 2009, only assets worth $3.5 million or more were subject to estate taxes, at a rate of 45 percent. But now, for the year 2010, the estate tax has disappeared entirely, only to be restored in 2011 at a rate of 55 percent on estates of $1 million or more, which is exactly where things stood before the 2001 change.

Many Couples At Risk

The new world of no estate tax places at particular risk certain couples who have built in Credit Shelter trust provisions (also called Bypass Trust or Family Trust provisions), which are designed to allow both spouses to take advantage of their estate tax exemptions.

These are common arrangements used in estate planning for married couples. With the estate tax gone, one possible problem is that the wording of some of these trusts could cause all assets to completely bypass the surviving spouse when the first spouse dies. This could mean that a surviving spouse might get nothing without the expensive process of claiming her elective share. For a more detailed explanation of this potential problem, see this blog posting:

http://www.ncestateplanningblog.com/2010/01/articles/estate-planning/the-estate-tax-is-gone-for-now-estate-plan-updates-are-imperative/

Everyone Especially Married Couples Should Have Their Estate Planning Reviewed ASAP.

Because of these tax changes, a review of your existing estate planning documents is essential.

And, of course, we re here to help. Give us a call this week.

Rowel Manasan is a friendly, “jargon free” estate planning attorney in the Los Angeles area. He offers estate planning services in the Los Angeles area and beyond, as well as a variety of legal services for regular families. For a Free Report on estate planning, visit: http://lafamilyestatelaw.com.

http://lafamilyestatelaw.com

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