Many married folks with a Revocable Living Trust (“RLT”) have a complicated planning tool commonly referred to as the (“A/B Trust”). In 2001, an estate paid a 55% estate tax on any assets valued at more than $675,000 (“the exemption”). Married couples were not guaranteed to each get the $675,000 exemption so they often created the A/B Trust to double the exemption to $1,350,000. With a higher exemption, your family was less likely to owe any estate tax.
In 2016, the tax rate is 40% on estates over $4,450,000 and the exemption can be applied to each spouse without the complexity of the A/B Trust. So, the exemption for a married couple is now $10,900,000. It is estimated that only 7,200 in the country will now need to plan for the estate tax.
If you and your spouse have a combined net worth of less than $10,900,000, you should consider simplifying your trust.
Not every family should have this planning removed. The A/B Trust can be drafted to provide lawsuit protection and remarriage protection for the surviving spouse. The A/B Trust can also provide protection for blended families. We suggest having our law firm review your trust if you think you might be a candidate for removing the A/B Trust. The review is free and you may find that your trust is outdated from other law changes as well.