Year End Estate Planning Before The Tax Relief Act Expires

25 Jun

The Tax Relief Act of 2010 expires December 31, 2012. Unless Congress extends the provisions of the Act (not likely), the marital deduction which currently shelters assets up to $ 10M in value total between spouses will likely drop to $1M per spouse or $2M total. Keep in mind that the VALUE of one’s estate includes not just the home, stocks, bonds, mutual funds, gold, silver, and ownership of a business, but also rental property, LLC ownership interests of a rental property, and even life insurance and retirement plans. An estate can therefore easily add up to $2M OR MORE.

What is the potential result if the Tax Relief Act is not renewed? Under current law while there are still good reasons for spouses to place their assets in trust, many would argue a marital trust is not necessary from an estate tax standpoint because the exemption is automatic anyway without a trust up to $10M. This large amount covers most people. But come January 1, 2013 if the $10M total marital deduction goes away, spouses will be better able to avail of the marital deduction amount, whatever it turns out to be, by setting up a marital revocable trust.

For example, AFTER January 1, 2013 if the totality of the marital estate WITHOUT a marital trust is $2.5M there could be an estate tax on the $ 2.5M ( which the heirs pay) upon the death of the surviving spouse. The way to shield at least $1.25 M ( 1/2 of the estate value in this example), from estate tax would be through a marital trust. Keep in mind that the current estate tax rate is 35%, but effective January 1, 2013 the rate could go to 55%. So not only is the exemption amount drastically less the rate could be more!

What should you do before year end? My office will be working with clients between now and year end to put in place an estate plan which includes creating a marital revocable trust that will allow for maximizing the estate tax exemption whatever the amount turns out to be, integrating the trust with life insurance if required, and providing for the estate needs of minor children if any, while accomplishing all of the other benefits to be derived from revocable trusts. We also offer an estate package which includes special will provisions to go with the trust and the all important health care power of attorney for spouses.

I strongly recommend NOT waiting until year end to put a plan into place. You have to allow for a period of time just to put together your asset picture for our review,  allow time for a discussion of the options, the drafting of the documents while also allowing time for last minute revisions if necessary.


If interested, we offer a free 1/2 phone consultation to Pages LA readers. I can be reached at 310- 652 8090 or please visit

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