President Obama signed into law the American Taxpayer Relief Act on January 2, 2013 which permanently raised the estate tax exemption and added an inflation index, such that it rises every year to account for inflation. Better still, the same law allows for spousal portability of estate tax exemptions, which this blog recently examined . The amount for 2016 is $5.45 million per person, $10.9 million per couple. This is a significant change from just 2008 when it was $2 million dollars and even as low as $675,000 in 2001 and $1 million in 2003 which was not that high considering that most people pay off their mortgage and probably have substantial retirement assets by the time they of retirement age.

For those amongst us who continue to work because that is part of their identity and not out of necessity, the $1 million threshold could easily be met. With the much larger $5.45 million exemption, less than .3 percent of estates in this country will met that threshold. So for all of those couples and individuals who planned on the much lower threshold your plans were likely well designed, but only under the then lower tax exemption. Now, with the much higher threshold and spousal portability, it is best to reexamine these estate planning documents. If one of the previous tools that you employed to insure lower tax liability was the AB trust also known as a bypass trust or even a family trust, it is likely that this will no longer serve you, your spouse, your estate or your heirs. Very briefly, depending on the size of your estate, it may no longer provide as great of tax relief as it once did and may unduly restrict your spouse by limiting their income, increase accounting costs, impose unneeded legal filing and generally complicate their life with other unforeseen complications that no longer serve their purpose.


The fact that estate tax and estate planning laws change is both a positive thing as well as a detriment. Certainly you want to just create a plan and be done with it so you can move on. At the same time you do not want to create a plan that is so rigid that any changes in law or your life situation will mean that your estate planning will be a burden. Furthermore, estate planning, just like financial planning, investing and work in general requires a dynamic, fluid approach.

What works today will not work tomorrow. As such, it is always best to reexamine your estate planning from time to time. This is all the more true if you have an AB trust as part of your estate planning strategy. But you must also keep in mind that just as the laws recently changed, you must also keep in mind that we live in politically volatile times. Estate tax exemptions can change again. Flexibility of approach is the order of the day with respect to estate planning. You can create estate planning strategy that takes into account the political uncertainty of estate tax exemptions.

To insure that your estate planning strategy is forward thinking and up to date, you must consult with an experienced estate planning attorney immediately.

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