Abstract
Tax law favors the married. You may not feel that way on April 15 of each year, but a variety of exemptions and deferrals from taxes are only available to married couples. The ticket to this tax-haven nirvana is that you have to plan to have your estate take advantage of most of them before you die—once you’re no longer here, it’s too late.
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Notes
- 1.
Spouse not a citizen? You can flip to Chapter 19, “Planning Guide for Noncitizens,” to find out about leaving assets to your spouse.
- 2.
Which, of course, may and probably will change. Stay tuned or go to my website, www.deirdrewheatleyliss.com .
- 3.
A new estate tax law could mean that your exemption won’t necessarily vanish. I talk about the idea of “portability” of your estate tax exemption at the end of this chapter.
- 4.
It could be that you’re not planning to leave all your assets to your spouse because this is a second marriage, or you have other family members you want to benefit. If that’s the case, I suggest you look at Chapter 17, “Planning Guide for Second Marriages,” for some thoughts on how you can tailor an inheritance when you want to benefit your spouse and your family other than your spouse.
- 5.
Remember, just because you’re married to each other doesn’t mean you have to leave all your assets to each other or for each other’s benefit. There will be a minimum your spouse must receive based on state law, but you’re free to leave the balance to whomever else you like. Just bear in mind that if the balance exceeds your federal or state estate tax exemption amount, then taxes will have to be paid when you die, even though your spouse is still alive.
- 6.
The restriction on self-distributions applies to any person who is both a trustee and a beneficiary of the trust. If a trustee/beneficiary has total discretion over the trust assets, then all the assets in the trust will be considered “theirs” for estate tax and asset-protection purposes. The standards of “health, education, maintenance, and support” create a wall between the trustee/beneficiary’s own assets and the assets in the trust.
- 7.
The same advice applies to any person who is acting as a trustee of the trust for which they’re also a beneficiary. If the driving concern in creating the trust is asset protection, the beneficiary should be a co-trustee at the most and restricted from participating in distributions to themselves.
- 8.
The power of appointment can be granted to anyone, not just your spouse. The person could be a beneficiary or not, as your family circumstances dictate. I go over this in more detail in Chapter 6, “Trust in Trusts.”
- 9.
The best way to set up this type of arrangement is through a unitrust. I discuss unitrusts in detail in Chapter 17, where I talk about planning for second marriages, because this is a situation in which I find a unitrust can solve a lot of problems.
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© 2013 Deirdre R. Wheatley-Liss
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Wheatley-Liss, D.R. (2013). Planning Guide for Marrieds. In: Plan Your Own Estate. Apress, Berkeley, CA. https://doi.org/10.1007/978-1-4302-4495-0_14
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DOI: https://doi.org/10.1007/978-1-4302-4495-0_14
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