When you finish creating your estate plan, you might be pretty satisfied that it will stand the test of time and serve as a clear representation of your wants and wishes after you pass away, whenever that may be. Even if you face no major life changes, though, you may eventually need to make alterations to your plan. Why? The laws surrounding wills, trusts, probate, and more are always subtly shifting.
Recently, many people creating estate plans have been utilizing a pair of underused rules. Depending on your particular circumstances, you may want to take a glance at these procedures with a professional estate planning attorney to see if they could be helpful to you.
Revocable Grantor Trust
A tool used to help estates avoid going through probate, a revocable grantor trust allows you to send assets to yourself as a trustee. Typically, a trustee is someone the trust creator, well, trusts; being able to set yourself as the primary trustee allows you to completely control your assets while you are alive, as well as modify or eliminate the trust entirely. When you pass away, your chosen successor will then assume the responsibility of conveying your assets to the proper beneficiaries.
In most estate plans involving married couples, two trusts would be created, effectively allowing them to pass along twice as much to their children or beneficiaries, with a dollar cap – or exclusion – of roughly $5.5 million per person. Together, this would set up nearly $11 million to be passed along to children. However, once one spouse passes away, the other absorbs their trust, and now the original exclusion amount applies to the combined fortune. What can be done to try to restore that planned $11 million?
The Internal Revenue Service (IRS) has recently adjusted the rules and created what is known as portability. Using portability properly allows a surviving spouse's trust to take advantage of any unused portion of their deceased spouse's exclusion. This opens a window for them to make large purchases, create financial gifts, or perhaps make additional investments, granting additional benefits to their beneficiaries.
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