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The Estate of The Union Episode 9 out now

The Estate of The Union Episode 9 out now!

The Estate of The Union Episode 9 out now! In the latest installment, Brad Wiewel of Texas Trust Law chats with Grace Cook of Harrell Funeral Home about a subject that is often overlooked – pre-planning your funeral.

Planning a funeral can be a daunting task for loved ones still grieving. It can also be an overwhelming financial burden on the family. Pre-arranging your own service will help to ease the burden of your loved ones.  It will also alleviate any questions, problems or differences, which can occur among family members. The arrangements you make will reflect your exact wishes and desires. You can give this gift of love by providing meaningful final instructions.

Brad and Grace share a lively discussion of the common problems she sees with funeral planning, as well as some of the more unique and special ways families have arranged memorials for the deceased. It can seem like a heavy subject, but pre-planning your funeral might be the last, best plan you ever make!

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insight into estate planning, making an often daunting subject easier to understand.

It is Estate Planning Made Simple!

Harrell Funeral Home is the largest family-owned funeral home in Austin and the surrounding areas. You may reach them at harrellfuneralhomes.com.

The Estate of The Union can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. Please click on the link below to listen to the new installment of The Estate of The Union podcast. The Estate of The Union Episode 9 out now. We hope you enjoy it.

The Estate of The Union Podcast Episode 9 out now

Texas Trust Law/The Wiewel Law Firm focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. 

What should women know about long-term care

What Should Women Know about Long-Term Care?

A longer retirement increases the odds of needing long-term care. An AARP study found more than 70% of nursing home residents were women, says Kiplinger’s recent article entitled “A Woman’s Guide to Long-Term Care.”  What should women know about long-term care?

Living longer also increases the chances of living it alone because living longer may mean outliving a spouse. According to the Joint Center for Housing Studies of Harvard University, “In 2018, women comprised 74% of solo households age 80 and over.”

The first step is to review your retirement projections. It’s wise to look at “what-if” scenarios: What-if the husband passes early? How does that impact their retirement? What if a female client lives to 100? Will she have enough to live on? What if a single woman needs long-term care for dementia? Alzheimer’s and dementia can last for years, eating up a retiree’s nest egg.

Medicare and Medicaid. Government programs, such as Medicare and Medicaid, are complicated. For instance, Medicare may cover some long-term care expenses, but only for the first 100 days. Medicare doesn’t pay for custodial care (at home long-term care). Medicaid pays for long-term care. However, you must qualify financially.

Planning for long-term care. If a woman has a high retirement success rate, she may want to self-insure her future long-term care expenses. This can mean setting up a designated long-term care investment account solely to be used for future long-term care expenses. If a woman has a modest degree of retirement success, she may want to lower her current expenses to save more for the future. She may also want to look at long-term care insurance.

Social Security. Women can also think about waiting to claim Social Security until age 70. If women live longer, the extra benefits accrued by waiting can help with long-term care. Women with a higher-earning husband may want to ask the higher-earning spouse to delay until age 70, if possible. When the higher-earning spouse dies, the widow can step into the higher benefit. The average break-even age is generally around 77-83 for Social Security. If an individual can live longer than 83, the more dollars and sense it makes to delay collecting until age 70.

Estate Planning. Having a comprehensive estate plan is a must. Women (and men) should have a power of attorney (POA). A POA gives a trusted agent the ability to write checks and send money to pay for long-term care.

When it comes to long-term care, women should know their own health and the potential drain on the retirement savings. Work with a financial advisor and estate planning attorney to make sure your later years are secure.

If you would like to learn more about long-term care, please visit our previous posts.

Reference: Kiplinger (July 11, 2021) “A Woman’s Guide to Long-Term Care”

 

benefits of 529 college saving plans

Many Benefits of 529 Plans

There are many benefits of 529 college saving plans. You might think that tax-deferred savings is the main benefit, along with tax-free withdrawals for qualifying higher education expenses. However, there are also state tax incentives, such as tax deductions, credits, grants, or exemption from financial aid consideration from in-state schools in certain states.

Forbes’ recent article entitled “7 Benefits You Didn’t Know About 529 College Savings Plans (But Should)” says there are many more advantages to the college savings programs than simple tax benefits.

1) Registered Apprenticeship Programs Qualify. You can make qualified withdrawals from a 529 plan for registered apprenticeship programs. These programs cover a wide range of areas with an average annual salary for those that complete their apprenticeship of $70,000.

2) International Schools Usually Qualify. More than 400 schools outside of the US are considered to be qualified higher education institutions. You can, therefore, make tax-free withdrawals from a 529 plan for qualifying expenses at those colleges.

3) Gap Year and College Credit Classes for High School. Some gap year programs have partnered with higher education institutions to qualify for funding from 529 accounts. This includes some international and domestic gap year, outdoor education, study-abroad, wilderness survival, sustainable living trades and art programs. Primary school students over 14 can also use 529 funds for college credit classes, where available.

4) Get Your Money Back if Not Going to College. If your beneficiary meets certain criteria, it’s possible to avoid a 10% penalty and changing the plan from tax-free to tax-deferred. For this to happen, the beneficiary must:

  • Receive a tax-free scholarship or grant
  • Attend a US military academy
  • Die or become disabled; or
  • Get assistance through a qualifying employer-assisted college savings program.

Note that 529 plans are technically revocable. Therefore, you can rescind the gift and pull the assets back into the estate of the account owner. However, there are tax consequences, including tax on earnings plus a 10% penalty tax.

5) Private K–12 Tuition Is Qualified. 529 withdrawals can be used for up to $10,000 of tuition expenses at private K–12 schools. However, other expenses, such as computers, supplies, travel and other costs are not qualified.

6) Pay Off Your Student Loans. If you graduate with some money leftover in a 529 account, it can be used for up to $10,000 in certain student loan repayments.

7) Estate Planning. Contributions to a 529 plan are completed gifts to the beneficiary. These can be “superfunded” for up to $75,000 per beneficiary in a single year, effectively using five years’ worth of annual gift tax exemption up front. For retirees with significant RMDs (required minimum distributions) from qualified accounts, such as 401(k)s and traditional IRAs, the 529 plan offers high contribution limits across multiple beneficiaries, while retaining control of the assets during the lifetime of the account owner. Assets also pass by contract upon death, avoiding probate and estate tax.

Work closely with your financial advisor and estate planning attorney to ensure you are getting the most benefits out of your 529 college saving plans.

If you would like to read more about 529 plans, please visit our previous posts.

Reference: Forbes (July 15, 2021) “7 Benefits You Didn’t Know About 529 College Savings Plans (But Should)”

New Installment of The Estate of The Union Podcast

 

www.texastrustlaw.com/read-our-books

Which trust is right for you

Which Trust Is Right for You?

Everyone wins when estate planning attorneys, financial advisors and accounting professionals work together on a comprehensive estate plan. Each of these professionals can provide their insights when helping you make decisions in their area. Guiding you to the best possible options tends to happen when everyone is on the same page, says a recent article “Choosing Between Revocable and Irrevocable Trusts” from U.S. News & World Report. Which trust is right for you?

What is a trust and what do trusts accomplish? Trusts are not just for the wealthy. Many families use trusts to serve different goals, from controlling distributions of assets over generations to protecting family wealth from estate and inheritance taxes.

There are two basic kinds of trust. It can be difficult to know which trust is right for you and your family situation. There are also many specialized trusts in each of the two categories: the revocable trust and the irrevocable trust. The first can be revoked or changed by the trust’s creator, known as the “grantor.” The second is difficult and in some instances and impossible to change, without the complete consent of the trust’s beneficiaries.

There are pros and cons for each type of trust.

Let’s start with the revocable trust, which is also referred to as a living trust. The grantor can make changes to the trust at any time, from removing assets or beneficiaries to shutting down the trust entirely. When the grantor dies, the trust becomes irrevocable. Revocable trusts are often used to pass assets to adult children, with a trustee named to manage the trust’s assets until the trust documents direct the trustee to distribute assets. Some people use a revocable trust to prevent their children from accessing wealth too early in their lives, or to protect assets from spendthrift children with creditor problems.

Irrevocable trusts are just as they sound: they can’t be amended once established. The terms of the trust cannot be changed, and the grantor gives up any control or legal right to the assets, which are owned by the trust.

Giving up control comes with the benefit that assets placed in the trust are no longer part of the grantor’s estate and are not subject to estate taxes. Creditors, including nursing homes and Medicaid, are also prevented from accessing assets in an irrevocable trust.

Irrevocable trusts were once used by people in high-risk professions to protect their assets from lawsuits. Irrevocable trusts are used to divest assets from estates, so people can become eligible for Medicaid or veteran benefits.

The revocable trust protects the grantor’s wishes, if the grantor becomes incapacitated. It also avoids probate, since the trust becomes irrevocable upon death and assets are outside of the probated estate. The revocable trust may include qualified assets, like IRAs, 401(k)s and 403(b)s.

However, there are drawbacks. The revocable trust does not provide tax benefits or creditor protection while the grantor is living.

Your estate planning attorney will know which trust is right for your situation, and working with your financial advisor and accountant, will be able to create the plan that minimizes taxes and maximizes wealth transfers for your heirs. If you would like to learn more about the different types of trusts available, please visit our previous posts. 

Reference: U.S. News & World Report (Aug. 26, 2021) “Choosing Between Revocable and Irrevocable Trusts”

New Installment of The Estate of The Union Podcast

 

www.texastrustlaw.com/read-our-books

how to handle an inherited IRA

How to Handle an Inherited IRA

You can’t leave the money in an original IRA inherited from the deceased. There are several ways you can take the funds after inheriting either a traditional or Roth IRA. However, your options will be restricted by several factors. Note that failure to handle an inherited IRA properly can lead to a significant penalty from the IRS.

Kiplinger’s recent article entitled “I Inherited an IRA. Now What?” says you should understand what type of beneficiary you are under the new SECURE Act, what options are available to you and how they fit into your tax and investment profile.

There are several different ways to handle an inherited IRA. The first step after being left an IRA is getting the details about the account. This includes whether it’s a traditional IRA or a Roth IRA. Unlike Roth IRAs, traditional IRAs require the owner to take minimum withdrawals or “Required Minimum Distributions” (RMDs), when they turn 72. As a result, if the original account owner was older than 72 when they died, be certain that the RMD has been taken for the year. If not, there’s a potentially significant IRS penalty. You should also identify when the account was opened. This may exempt you from taxes later on, if you inherited a Roth IRA. It is also recommended that you verify that you are the sole beneficiary.

Spousal Heirs Can Transfer the Funds to a New IRA. Spousal heirs can transfer the assets from the original owner’s account to their own existing or a new IRA. You can do this even if the deceased was over 72 and was taking RMDs from a traditional IRA. With your existing or new account, you can delay RMDs until you reach 72. You can also complete this type of transfer with a Roth. Since these accounts don’t require RMDs, you don’t need to worry about withdrawals. This is a good option for beneficiaries who are younger than their deceased spouses and don’t need the income at that point. Transferring the funds to your own traditional IRA lets you delay taking RMDs. However, if you’d like to withdraw the funds from the new IRA before you are 59½, you’ll be subject to the 10% early-withdrawal penalty.

Spousal Stretch IRA. Spousal heirs who inherit either a traditional or a Roth IRA can transfer the assets into an inherited IRA, which is different than a spousal transfer. The original account owner’s financial institution will require you to open the inherited IRA with them, but you can also move the funds to a new institution. First, open an inherited IRA at the original owner’s institution and then open an inherited IRA at the institution to which you want to move the account. Request a direct IRA-to-IRA transfer. When titling the account, follow the format: “[Decedent’s Full Name], for benefit of [Beneficiary’s Full Name]” or “[Beneficiary’s Full Name], as beneficiary of [Decedent’s Full Name].”

Once you have a handle on the inherited IRA, you can withdraw the funds in two ways: (i) the life expectancy method is where you take annual distributions based on your own life expectancy, not the original owner’s (also known as a “stretch IRA”); or (ii) the 10-year method, where you must withdraw all funds within 10 years.

Non-Spousal Heirs Have Limited Choices. The SECURE Act of 2019 got rid of the stretch IRA for non-spousal heirs who inherit the account on or after Jan. 1, 2020. The funds from the inherited IRA – either a Roth or a traditional IRA – must be distributed within 10 years of the original owner passing away, even if the deceased person died before or after the year in which they reach age 72. There are exceptions, such as when the heir is a minor, disabled, or more than a decade younger than the original account owner. In these cases, they can withdraw the funds using the stretch IRA method.

If you’re required to take out the funds within 10 years, you don’t need to withdraw a certain amount of money each year from an inherited IRA. You can leave the funds to grow in the account tax deferred the entire time and then withdraw the funds at the end. However, if you withdraw too much in one year, it could move you into a higher tax bracket.

Lump Sum. All beneficiaries can take the funds in one large distribution, either from a traditional or Roth IRA. However, this is generally discouraged for those with traditional IRAs because they’ll have to pay income taxes on the distribution all at once and may move to a higher tax bracket.

Plan for Taxes. If you inherit a Roth IRA, you shouldn’t have to pay taxes on distributions if the original account was opened at least five years ago, or a conversion from a traditional IRA to a Roth occurred at least five years ago. Determine when the original account was opened to see if some of the distribution will be taxable. Make sure you know how to handle an inherited IRA. Talk with an estate planning attorney today.

If you would like to read more about IRAs and other retirement accounts, please visit our previous posts. 

Reference: Kiplinger (Aug. 4, 2021) “I Inherited an IRA. Now What?”

New Installment of The Estate of The Union Podcast

 

www.texastrustlaw.com/read-our-books

failures of do-it-yourself estate planning

Failures of Do-It-Yourself Estate Planning

US News & World Report’s recent article entitled “6 Common Myths About Estate Planning explains that the coronavirus pandemic has made many people face decisions about estate planning. Many will use a do-it-yourself solution. Internet DIY websites make it easy to download forms. However, there are mistakes people make when they try do-it-yourself estate planning. There are ways to avoid the failures of do-it-yourself estate planning.

Here are some issues with do-it-yourself that estate planning attorneys regularly see:

You need to know what to ask. If you’re trying to complete a specific form, you may be able to do it on your own. However, the challenge is sometimes not knowing what to ask. If you want a more comprehensive end-of-life plan and aren’t sure about what you need in addition to a will, work with an experienced estate planning attorney. If you want to cover everything, and are not sure what everything is, that’s why you see them.

More complex issues require professional help. Take a more holistic look at your estate plan and look at estate planning, tax planning and financial planning together, since they’re all interrelated. If you only look at one of these areas at a time, you may create complications in another. This could unintentionally increase your expenses or taxes. Your situation might also include special issues or circumstances. A do-it-yourself website might not be able to tell you how to account for your specific situation in the best possible way. It will just give you a blanket list, and it will all be cookie cutter. You won’t have the individual attention to your goals and priorities you get by sitting down and talking to an experienced estate planning attorney.

Estate laws vary from state to state. Every state may have different rules for estate planning, such as for powers of attorney or a health care proxy. There are also 17 states and the District of Columbia that tax your estate, inheritance, or both. These tax laws can impact your estate planning. Eleven states and DC only have an estate tax (CT, HI, IL, ME, MA, MN, NY, OR, RI, VT and WA). Iowa, Kentucky, Nebraska, New Jersey and Pennsylvania have only an inheritance tax. Maryland has both an inheritance tax and an estate tax.

Setting up health care directives and making end-of-life decisions can be very involved. Avoid the failures of do-it-yourself estate planning. It’s too important to try to do it yourself. If you make a mistake, it could impact the ability of your family to take care of financial expenses or manage health care issues. Don’t do it yourself.

If you would like more information on crating an estate plan, please visit our previous posts. 

Reference: US News & World Report (July 5, 2021) “6 Common Myths About Estate Planning”

New Installment of The Estate of The Union Podcast

 

www.texastrustlaw.com/read-our-books

what should a health care directive include

What should a Health Care Directive include?

Healthy adults often make the mistake of thinking they don’t need a health care directive. However, the pandemic has made clear everyone needs this estate planning document, at any time of life, according to a recent article “Health care directive beneficial for anyone” from The Times-Tribune. So what should a health care directive include?

Anytime a person becomes severely incapacitated, even if just for a short time, and any time a young person becomes a legal adult, a health care directive is needed. In other words, everyone over the age of 18 needs to have a health care directive.

Several health care directives are prepared by an estate planning attorney as part of a comprehensive estate plan. Health care directives should include the following:

A Living Will or Advance Directive is used to express wishes for medical treatments, if you are not able to express them yourself.

A Power of Attorney for Health Care (also known as a Durable POA for Health Care or a Health Care Proxy) lets you name a trusted person who will make health care decisions on your behalf,sss if you cannot make the decisions or communicate your wishes.

A HIPAA Privacy Authorization makes it possible for health care providers to share medical information with a person of your choice. Otherwise, the health care providers are not permitted to discuss your medical history, medical status, diagnostic reports, lab results, etc., with family members.

Short term incapacity can result from illness or recovery from surgery or intense medical treatments. Having these documents in place permits a person you trust to have important conversations with your health care providers and to make decisions on your behalf.

Physicians will be permitted to discuss medical care with a named agent, who, in turn, will be able to discuss care or status with family members.

This documentation will also allow an authorized person to help you with insurance companies, billing departments at hospitals, pharmacies and to schedule medical appointments on your behalf.

If you are not married, this is especially important. Even a partner of many years has no legal right to act on your behalf.

For parents of young adults, having these documents in place will allow them to stay involved in an adult child’s healthcare. Make sure your health care directives include all the documents you need. It’s not a scenario that any parent wants to contemplate, but having these documents prepared in advance can save a great deal of stress and anguish, if and when they are needed.

If you are interested in learning more about health care directives, and other important estate planning documents, please visit our previous posts. 

Reference: The Times-Tribune (Aug. 15, 2021) “Health care directive beneficial for anyone”

New Installment of The Estate of The Union Podcast

 

www.texastrustlaw.com/read-our-books

Estate planning for same-sex couples

Estate Planning for Same-Sex Couples

Proper estate planning can help ensure that your wishes are carried out exactly as intended in the event of a death or a serious illness, says Insurance Net News’ recent article entitled “What Same-Sex Partners Need to Know About Estate Planning.” Having a clearly stated plan in place can give clear instructions and potentially avoid any fights that otherwise might occur. With estate planning for same-sex couples, this may be even more crucial.

Your estate plan should include a will or trust, beneficiary forms, powers of attorney, a living will and a letter of intent. It’s also smart to include a secure document with a list of your accounts, debts, assets and contact info for any key people involved in those accounts. This list should contain passwords for locked accounts and any other relevant information.

A will is a central component of an estate plan which ensures that your wishes are followed after you pass away. This alleviates your family from the responsibility of determining how to divide your property and takes the guessing and stress out of how to pass along belongings. A will or trust might also state the way in which to transfer your financial assets to your children. You should also make sure your beneficiary forms are up to date with your spouse for life insurance policies, bank accounts and retirement accounts.

For same-sex couples, it is particularly important to create a clear medical power of attorney and create a living will that states your medical directives, if you aren’t able to make those decisions on your own. If you aren’t married, this will give your partner the legal protection he or she needs to make those decisions. It is important for you to take time to have those conversations with your partner, so the plans and directives are clear. You can also draft a letter of intent, which is a written, personal note that can be included to help detail your wishes and provide reasoning for the decisions.

Protecting Your Minor Children. Name a legal guardian for them in your will, in the event both parents die. Same-sex couples must make sure that both parents have equal rights, especially in a case where one parent is the biological parent. If the surviving spouse or partner isn’t the biological parent and hasn’t legally adopted the children, don’t assume they’ll automatically be named guardian.  These laws vary from state to state.

Dissolve Old Unions. There could be challenges, if you entered into a civil union or domestic partnership before your marriage was legalized. Prior to the 2015 marriage equality ruling, some same-sex couples married in states where it was legal but resided in states where the marriage wasn’t recognized. If you and your partner broke up, but didn’t legally dissolve the union, it may still be legally binding. Moreover, some states converted civil unions and domestic partnerships to legal marriages, so you and a former partner could be legally married without knowing it. If a former union wasn’t with your current partner, make certain that you legally unbind yourself to avoid any future disputes on your estate.

Review Your Real Estate Documents. Check your real estate documents to confirm that both partners are listed and have equal rights to home ownership, especially if the home was purchased prior to the legalization of same-sex marriage or if you aren’t married. There are a few ways to split ownership of their property. This includes tenants in common, where both partners share ownership of the property, but allows each individual to leave their shares to another person in their will. There’s also joint tenants with rights to survivorship. This is when both partners are property owners but if one dies, the remaining partner retains sole ownership.

Estate planning for same-sex couples can be a complex process, and they may have more stress to make certain that they have a legally binding plan. Talk to an experienced estate planning attorney about the estate planning process to put a solid plan to help provide peace of mind knowing your family is protected.

If you would like to read more about planning for same sex couples, please visit our previous posts.

Reference: Insurance Net News (June 30, 2021) “What Same-Sex Partners Need to Know About Estate Planning”

Photo by Olya Kobruseva from Pexels

New Installment of The Estate of The Union Podcast

 

www.texastrustlaw.com/read-our-books

Difference between Conservatorship and Guardianship

Difference between Conservatorship and Guardianship

It is common for people to misunderstand and confuse the difference between a conservatorship and a guardianship. A conservatorship is created to let one person manage another’s finances. The conservator is court- appointed and may be responsible for financial decisions, such as retirement planning, the purchase or sale of property and the transfer of other financial assets.

The laws for conservatorships and guardianships can vary widely in different states. A conservatorship or guardianship is typically necessitated by a disability or injury that prevents a person from caring for themselves.

US News & World Report’s recent article entitled “How Conservatorships Can Prop Up or Tear Down a Loved One” explains that once you have a conservator in place, the burden is on you to prove you no longer need it. The biggest issue in most cases is abuse of power or neglect. Either (the conservator) is doing something self-serving, such as spending money on something other than the senior’s care, or they’re not helping the conservatee, or providing the care they need.

Estate planning attorneys may recommend a conservatorship or guardianship in standard estate planning documents, like a power of attorney. A conservator can be any adult, possibly a family member, who is tasked with the responsibility of managing the person’s finances.

Because a conservator would be in charge of a person’s assets, it’s common for the same person to be named to serve as attorney-in-fact or agent with a power of attorney. However, because a guardian is in charge of the person themselves, it’s wise to nominate the same people who are named to serve as health care agents in the client’s health care proxy. Sometimes, these are the same, but if they’re different, it is important for that difference to be stated.

A guardianship is created in cases when a person can’t take care of themselves and requires another person to make some or all of their personal decisions. This might include decisions about his or her medical care, support services, housing, or finances. While a court appoints both a conservator and a guardian, a conservatorship is generally limited to financial decisions. In contrast, a guardianship deals with personal decisions, like medical care, and may, in some instances, also cover financial decisions.

Just about every state has laws designed to protect those placed in a conservatorship or guardianship. For example, in New York, individuals must satisfy medical requirements to be determined unable to care for oneself. The burden of proof to meet such restrictions is high.

In addition, individuals can seek professional help in preparing for future circumstances that may prevent them from managing their finances and personal affairs. This includes estate planning documents, such as wills, powers of attorney, beneficiary forms and health care proxies. An estate planning attorney can help you better understand the difference between a conservatorship and a guardianship, and advise you which is the best option for you and your family.

If you would like to learn more about conservatorship and guardianship, please visit our previous posts. 

Reference: US News & World Report (Aug. 19, 2021) “How Conservatorships Can Prop Up or Tear Down a Loved One”

Photo by Nicholas Githiri from Pexels

New Installment of The Estate of The Union Podcast

 

www.texastrustlaw.com/read-our-books

The purpose of a credit shelter trust

The Purpose of a Credit Shelter Trust

The purpose of a credit shelter trust is for protecting assets from creditors, moving assets out of the estate to avoid probate and adding another layer of protection to a deceased spouse’s wishes. Only married couples can use credit shelter trusts, according to a recent article explaining it all: “How Does a Credit Shelter Trust Work?” from Yahoo! Finance.

The main reason to use a credit shelter trust is to minimize federal estate taxes on assets in the estate. Also known as “wealth transfer taxes,” the federal estate tax has been around since 1916. Estate tax rates are very high. Wealth more than $1 million over the exemption rate is taxed at 40%. While today’s federal estate tax exemption is very high—$11.7 million for individuals and $23.4 million for couples—it is generally understood that these numbers are not likely to remain at these historic levels. The current estate tax exemption expires in 2025, unless Congress acts to reduce it earlier.

Estate tax law changes often both at the federal and the state level, so estate planning attorneys continually track these changes to protect their clients.

The credit shelter trust, also known as a bypass trust, B trust, exemption trust or a family trust, is an irrevocable trust. As with all trusts, it is a contract between the trustor—the person who creates and funds the trust—and the trustee—the person in charge of the trust. The trust may contain any type of property, from cash, stocks, bonds and real estate to collectibles and artwork.

The credit shelter trust becomes effective upon the death of one of the spouses. Assets in the trust are not included in the estate of the surviving spouse. Depending upon the terms of the trust, these assets may pass to beneficiaries after the first spouse passes without incurring any tax liabilities. Alternatively, as long as the surviving spouse lives, they may receive income from assets in the trust.

Another purpose of a credit shelter trust is to protect the wishes of the decedent spouse. The trust document can be used to direct that some or all of the assets of the first spouse to die shall pass to the children of a first marriage or other specific beneficiaries.

Credit shelter trusts are one of many tools that can be used for estate planning. They have the added benefit of protecting assets from creditors and maintaining the family’s privacy, since assets in trust do not go through probate. Your estate planning attorney will know which kind of trust is best for your unique situation.

If you would like to read more about various types of trusts, please visit our previous posts.

Reference: Yahoo! Finance (Aug. 16, 2021) “How Does a Credit Shelter Trust Work?”

New Installment of The Estate of The Union Podcast

 

www.texastrustlaw.com/read-our-books

Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact The Wiewel Law Firm to schedule a complimentary consultation.
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