Recent changes have eroded some of the estate tax benefits of bypass trusts. And, if President Trump gets his way, the federal estate tax could be completely repealed.
Strategy: Don’t junk these trusts just yet. Although the need for bypass trusts may have diminished, and future savings are in doubt, these arrangements could still make sense.
Take a look at the big picture before you make any rash decisions.
Here’s the whole story: In the past, well-to-do individuals often reduced their exposure to federal estate tax liability by combining two fundamental tax breaks.
1. Unlimited marital deduction: Any transfer between spouses, whether it is made during one’s lifetime or upon death, is completely exempt from estate and gift taxes.
2. Estate tax exemption: Transfers to a nonspouse beneficiary may be sheltered by the estate tax exemption. Under current law, the effective exemption amount is $5 million (indexed to $5.49 milli...(register to read more)
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