When couples marry, they are usually not concerned with financial matters at first. On the other hand, with their change from single to married status comes some potential tax advantages in California. However, tax advantages do not only apply while the married couple is alive, it also helps as far as administering an estate to beneficiaries in the future. Couples can do this through a smart trust administration strategy.
Each couple is allowed a specific amount of assets to be left to heirs without having to pay estate taxes. This amount, which is now $5.43 million per person, is known as an exclusion. Therefore, both parents are allowed to pass a total of $10.86 million worth of assets to their children.
In the past, one would have to spend time deciding what asset would go into which trust. Usually, couples would set up two trusts right at the beginning of a couple’s marriage. This allows the couple to pass along twice the amount of assets to beneficiaries without tax liabilities.
However, the Internal Revenue Service has eased its restrictions by adding the portability rule. This allows a surviving spouse’s trust to utilize any unexercised portion of a deceased spouse’s exclusion. Many married couples are now looking to take advantage of this rule change and simplify their estate plan.
On the other hand, trust administration may still be complicated in some cases in California. Therefore, it is best to first research the rules and regulations governing trusts in order to ensure one’s estate planning goals are met. Additionally, one never knows when lawmakers will decide to change the rules regarding trusts and estate plans, which means one should periodically update one’s estate planning strategy.
Source: ustoday.com, “Your estate plan: Be aware of new laws“, Joseph A. Clark, September 13, 2015