Revocable Living Trust Are A Must Before January 2013

6 May

In 2010 the Obama Administration passed the Tax Relief Unemployment Insurance Reauthorization and Jobs Creation Act which increased the estate tax exemption to $ 5M per individual ( $10M for spouses). Thus for example an individual’s estate valued at $ 5M or less will pass to the heirs estate tax-free provided the individual dies on or before December 31, 2012. However come January 1, 2013 ( absent an extension of the bill by Congress which I wouldn’t count on), the estate tax exemption reverts to the rate which was in effect in 2001 which was $1M. What does this mean? It means a married couple whose combined estate is over $1M, which is likely if they own a home and life insurance, an estate tax  will be imposed on the estate and it’s heirs if the estate is valued at $1M or more.

Enter or should I say re-enter, the beauty of the A-B revocable living trust. An A-B trust effectively minimizes estate tax not to mention saves the estate potentially thousands in attorneys fees and court costs because there is no probate at death. Unlike if one dies with only a will ,where probate fees and costs will be paid, there is no probate court involved with the trust. But back to the estate tax. Where a married couple has an A-B trust in place, and assuming the estate tax exemption is reduced to $1M (or some number less than the current exemption) beginning in 2013, upon the first spouse to die the entire estate passes to the surviving spouse estate tax-free. When the survivor dies, only survivor’s portion of the estate gets taxed. In other words on an estate over $1M only $ 500,000 or less becomes subject to tax. Had there been no A-B trust in place, there would be estate tax on the entire estate valued at over $1M. This is a considerable savings for an estate over $ 1M.

In futures blogs I will talk about A-B trust planning for those who own life insurance and/or rental property and the added benefits to be derived.

The law office of Stephen J. Gross located in West Los Angeles concentrates on estate document preparation including revocable living trusts, integration of the trust with life insurance and rental property assets, real estate and commercial law, corporation and LLC formations, and asset protection from judgment creditors. A free 1/2 hour phone consultation is offered to PagesLA readers. We can be reached at 310 652 8090 or please visit


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