No Longer the Tail Wagging the Dog – but Tax-Wise Estate Planning is Still Important in 2014

Great Estate Planning Article from Walker Lambe!

Since the introduction of an unlimited marital deduction in 1981, coupled with higher and higher estate tax exemption amounts, probably every competent estate planner could and would offer prospective clients potentially dramatic tax savings from “Bypass” (or “Credit Shelter,” or “A-B”) Trust planning, facilitating maximum use of two exemptions (and getting the clients to “first base”). These potential savings could be pretty easily quantified, translating into a pretty easy “sell” for many, many families. The so-called Bush tax cuts of 2001 phased in dramatic new increases in the exemption amounts, from $675,000 in 2000, to $3.5 Million (pre-repeal) in 2009; this may have reduced the number of families with interests in more “advanced” planning measures to minimize or avoid exposure to estate taxes (getting to “second base” and beyond), but “first base” was still an easy, and for many, even more valuable planning goal.

Things are a bit different now. After the year of repeal in 2010, and another two years of dancing, since early 2013 we’ve had a “permanent” (until Congress acts affirmatively to change it) $5 Million estate tax exemption (adjusted for inflation), including a $5 Million lifetime gift tax exemption, and a $5 Million generation-skipping tax exemption, and we also have a new rule that makes a deceased spouse’s unused exemption “portable” – and therefore usable by the surviving spouse (so that getting to “first base” is no longer an obvious goal for every client whose family’s assets might ever reach $5 Million).


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