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Estate Tax Law Changes Raise Important Question

On January 1, 2013, when Congress made the Estate Tax Law permanent, it set the exemption for estate and gift taxes at $5.25 million, per person, and it allowed any person’s unused estate and gift tax exemption to be carried over by their surviving spouse (i.e. “portability”).

As a result, very, very few couples are now subjected to estate and gift taxes or are ever likely to be. Therefore, for these couples who are likely never to be subjected to the estate and gift tax, the question raised is: Do they need the so-called classic “A-B Trust” scenario found in the vast majority of today’s Living Trusts?

For the younger couple, the answer is probably “yes,” meaning that their Estate Planning Attorney would still use the classic structure.  For couples with kids from previous relationships or for those in a second marriage, the answer is also probably “yes.”  However, for older couples with long-term marriages and stable families, the answer may very well be ‘no.’

As a result of this change, everyone should revisit their Living Trust and meet with their Estate Planning Attorney or financial advisor to find out which structure fits their particular needs.