Below is a brief glance at what you’ll find in the May/June 2013 issue.
Link to issue: May/June 2013
Exemption portability: Should you rely on it?
One of the significant changes under the American Taxpayer Relief Act of 2012 was to make estate tax exemption “portability” permanent. When one spouse dies, portability allows the surviving spouse to use the deceased spouse’s unused exemption amount. Portability simplifies estate planning, but, for many people, particularly the affluent, more-sophisticated strategies continue to offer significant benefits. This article takes a look at credit shelter trusts, with a sidebar offering a specific example.
Using the GST tax exemption to build a dynasty
Those wishing to preserve their wealth for generations to come will need to leverage their generation-skipping transfer (GST) tax exemption. To ensure that the exemption goes as far as possible, it’s important to allocate it wisely. The American Taxpayer Relief Act of 2012 made permanent several GST tax-related provisions, including the automatic allocation rules. Understanding these rules — and when to opt out — can help focus the exemption where it will do the most good. This article shows that, with careful planning, it’s possible to create a “dynasty trust” — a trust that continues for several generations.
Decant a trust to add trustee flexibility
This article discusses “John,” who is the trustee of his deceased brother’s irrevocable trust. In light of the recently enacted estate tax laws, as well as changing circumstances surrounding his brother’s family, John would like additional flexibility in adapting the trust to the new laws and evolving family situation. One of his options is to decant the trust. Decanting would allow him to use his distribution powers to “pour” funds from the trust into another trust with different terms. Even though this strategy is permitted in many states, decanting laws can vary dramatically among them. The article discusses some common differences.
Estate Planning Red Flag: Your plan includes a charitable lead trust
A charitable lead trust (CLT) makes annual payouts to a qualified charity for a specified period or for the grantor’s life. The remainder interest then passes to the grantor’s heirs or other noncharitable beneficiaries. Last year, the IRS finalized regulations that affect the way CLTs are taxed. As a result, they may be less attractive than before. This article explains the details.