Marital Deduction and Bypass Trust Planning
Implementing certain favorable estate planning tools geared towards the spouse, such as the marital deduction and bypass trust, are effective ways to avoid the estate and gift tax liability. Here's how they work.
- Property is still included in the decedent's gross estate.
- Property must be passed directly to the spouse.
- If the decedent leaves everything to the surviving spouse, the estate gets 100% of the marital deduction.
- Property is taxed in estate of the surviving spouse at their death.
- QTIP Trust (surviving spouse gets income for life).
- Take advantage of the applicable credit amount ($2,045,800 for 2013).
- No marital deduction, taxed in the first spouse to die estate.
- Executor then takes the full unified credit deduction on the estate tax return.
- Amount of credit is placed in trust removing the asset from the transfer to the spouse. The surviving spouse can invade the trust for health, education, maintenance and support.
- Highly appreciated assets are often used to fund the trust.
- Often known as "Credit Shelter Trust" or "B-Trust."
- Trust prevents the surviving spouse from inheriting all of the assets under the marital deduction which could create a huge estate tax problem at the second death.
Inter-Vivos and Testamentary Charitable Gifts
Managing WealthDon't let unexpected taxes eat away at your inheritance or burden your heirs.
TaxesThe 2010 estate tax lapse could be costly to your family if it keeps you from planning.
Financial AdvisorInheritance is a double-edged sword, as leaving money can create estate tax burdens. Opting for a life insurance plan can help mitigate those burdens.
Financial AdvisorMany institutions want a piece of your portfolio, but trusts can provide a one-stop shop.
RetirementThis article explains the difference between the two estate transfer methods -- a will and a trust, and the circumstances under which each can be used.
InvestingThis arrangement allows you to have more control over your estate - both before and after your death.
Financial AdvisorDeath is not something that we wish to dwell on, but estate planning—and figuring out even more basic issues—is something we definitely should not avoid.
Financial AdvisorWhen someone dies, it's natural for a surviving spouse to grieve. But with a little planning, fear of an unknown financial future can be avoided.
Financial AdvisorA quick estate planning guide for high-net-worth individuals to help minimize taxes and costs, protect assets and plan for care.