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A Better Partnership


Jul 2013
July 01, 2013

Estate Planning Tip: Should you revoke your living trust?

Congress recently changed the estate tax law so that an estate must be worth more than $5.25 million before it is subject to estate tax.  Due to portability of the estate tax exemption, for married couples the applicable figure will often be $10.5 million.  As a result, very, very few estates will pay any estate tax.  Does this mean that trust you signed a few years ago is no longer useful?  The answer is almost certainly no.  There have always been, and continue be, many non-tax reasons for establishing and maintaining trusts, including the following:
  1. Trusts allow you to protect against disinheritance of your children due to remarriage by your spouse.
  2. Trusts allow you to protect assets from the creditors (including divorces) of your beneficiaries and permit assets to be held as a supplemental fund if the beneficiary has severe health problems instead of spent down.
  3. When combined with testamentary trusts under your will, trusts provide you with an easy way to protect assets from your spouse’s nursing home bills (after you die) that does not involve gifts 5 years before care is needed or the purchase of an expensive long term care policy.
  4. Trusts can help you to avoid the necessity of probate without using joint ownership and its attendant disadvantages.
  5. Trusts can provide for more efficient and clear cut management of your assets if you become incapacitated – as opposed to guardianship/conservatorship or reliance on durable powers of attorney.
  6. Trusts continue to have important tax advantages if you want to put money in trust for children or grandchildren – or if you’re worried that the estate tax exemption may be lowered in the future.

If you have not already created a trust, the tax law changes may make it slightly less compelling to create a trust today.  However, if you’ve already gone to the time and expense of creating and funding a trust, it would make little sense to undo it at this time.


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