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Four policy changes those with an estate plan should know

| Apr 1, 2021 | Estate Planning

One thing you should never do is execute an estate plan only to leave it gathering dust, untouched until your death. In Maryland and across the nation, estate laws change in ways that affects your estate plan and warrants a review. The new administration is a good example of this, as it ushers in four changes in law and policy that those with an estate plan will want to pay attention to.

Doubling the estate tax exemption in a credit shelter trust

Under the new administration, you can now double the estate tax exemption between spouses by having your will contain specific provisions stating that the surviving spouse has the option to disclaim all or part of their inheritance, and instead use those funds to create a credit shelter trust. This way, funds will pass free from the estate tax exemption upon the first death, and upon the surviving spouse’s death the trust will go to the named beneficiaries free from any estate tax.

Spousal limited access trusts

In a spousal limited access trust, one spouse will execute a trust naming the other spouse as beneficiary to that trust. The assets funding the trust utilize the lifetime gift tax exemption. The spouse that executed the truck cannot access trust assets, but the trustee can make distributions to the beneficiary when needed.

Clawback Trusts

Clawback trusts are irrevocable and the assets used to fund the trust can be up to what is free from the federal exemption. The person executing the trust is both the grantor and the trustee. They can designate themselves, their children and their grandchildren as beneficiaries to the trust. However, these trusts are grandfathered into the exemption laws as they were at the date the trust was funded.

Family limited partnerships

An entity known as a “family limited partnership,” can now be formed that has two levels of ownership: general partners who have all control over the partnership and limited partners who have no control over the partnership. Assets are gifted to the partnership and then the general partner will make a gift of up to 99% to the limited partners. This is one way of maximizing the lifetime gift tax exemption.

Learn more about estate planning

These are complicated estate planning topics. This post is for educational purposes only and does not contain legal advice. Those who want to learn more about estate planning are encouraged to visit our firm’s website for further information.

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