The American Taxpayer Relief Act (ATRA) was signed into law by former President Obama and was made effective January 2nd, 2013. ATRA provides an opportunity to greatly simplify your current estate plan. If your revocable family trust is designed to divide into a Survivor's Trust and an Exemption Trust (or Bypass Trust) after the death of the first spouse, please keep reading.
This is commonly referred to as a mandatory split or "A-B trust", and was implemented to minimize estate taxes payable at the survivor's death. Historically, failure to divide the family trust after the first death could have resulted in a 55% tax on every dollar in excess of the then applicable exclusion amount (AEA) at the death of the survivor. The AEA is the amount of wealth an individual can transfer at death without paying any transfer tax.
However, with the increase in the AEA (currently $5.49 million per person, $10.98 million per married couple), the former benefits of your trust, as designed, may now be outweighed by the administrative expense and complexities. In fact, your current trust may limit the surviving spouse's control and access to assets, increase the administrative expenses (legal and accounting fees), and complicate the administration following the first death.
If you are a married couple and you only have children of this marriage, we believe it may be in your best interest to consider amending your trust in order to make sure that your wishes for your family are more effectively carried out when it comes time to put these plans into action. We have provided a more in-depth explanation of the Federal Tax Legislative Changes here to be sure that your estate is or is not individually affected.
Please contact us at (805) 372-1507 to schedule a complimentary 30 minute consultation with one of our estate planning attorneys to determine if amending your trust makes sense for you and your family. Our experienced Thousand Oaks estate planning attorneys serve all of Ventura County.