Elder Law and Estate Planning provided to Mansfield, MA.

Elder Law and Estate Planning services are offered to the residents of Mansfield, MA and surrounding areas.

Easton, United States - August 1, 2018 /PressCable/ —

The author Brigitte von Weiss of VON WEISS LAW OFFICE is an estate planning and elder law attorney in Easton, MA. She is often asked about common estate planning errors.

A common estate planning error is not considering the disadvantages of trusts with estate tax provisions.

The federal estate tax is no longer a concern for most Massachusetts couples as the 2018 federal exemption amount, through portability, is $22.4 million.

Consequently, one carefully must consider the disadvantages of trusts with estate tax provisions (commonly referred to as “QTIP”, “credit shelter,” “bypass,” or “A-B” trusts) now that, for most Massachusetts couples, the only potential benefit is the minimizing of the Massachusetts estate tax.

The basic concept of trusts with estate tax provisions is to ensure that both spouses utilize their exemption amount by leaving assets to their respective trusts instead of to each other. For example, if Mary and John together have $1.5 million and Mary, as surviving spouse, dies with that amount, her estate will have a Massachusetts estate tax liability of $64,400. In contrast, if Mary and John split their assets and each leave half to their respective QTIP trusts, there is no Massachusetts estate tax liability upon the death of the surviving spouse.

Yet clients often complain about their trust with estate tax provisions. John and/or Mary may have one or more of the following complaints:

They may complain about the initial, as well as the on-going, legal expenses as they will need periodic updates to their trusts due to changes in the law. They may complain that the trusts did not serve their purpose of minimizing state estate taxes as they ultimately moved to a state that does not have state estate taxes or eventually reduced their assets below $1 million by spending on in-home, assisted living and/or nursing home care or by gifting to family members each year up to the amount of the annual exclusion.

Mary may be annoyed with having to file four tax returns each year as she, as the surviving spouse, must file a 1040 and Form 1 and she, as the trustee of John’s trust, must file a 1041 and Form 2.

Mary may complain about a capital gains tax liability upon selling her home if the value has increased since John’s death and his trust owns half of the home. For example, assume the home was purchase for $400,000, valued at $500,000 at John’s death and sold for $800,000. The tax basis of Mary’s half is $200,000 and John’s trust’s half is $250,000. Mary does not owe any capital gains tax as she has a $250,000 exclusion, which cover her gain of $200,000. In contrast, the trust has a gain of $150,000 and does not qualify for an exclusion, resulting in a capital gain tax liability.

In sum, trusts with estate tax provisions are not a one-size-fits-all plan. One carefully must consider the client’s individual situation and all of the available options for minimizing state estate taxes such as annual gifting and transfers to the next generation at the death of the first-to-die spouse. Please visit http://vonweisslaw.com/ for more information.

Nothing in this article should be considered legal advice as this is a complicated area of the law.

Contact Info:
Name: Brigitte von Weiss
Organization: The Von Weiss Law Office
Address: 50 Oliver Street, Easton, Massachusetts 02356, United States
Phone: +1-508-238-3005

For more information, please visit http://vonweisslaw.com/index.html

Source: PressCable

Release ID: 387961