These are all excellent questions for the estate planning attorney that you retain to prepare your documents for you. There are too many variables and unknowns in your fact situation, to give you any specific guidance in this forum. An attorney needs to review all of this information with you, especially in light of your objectives, in order to give you confident direction. You are wise to be taking care of this at this point.
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I agree with Mr. Frederick. In addition, I would like to point out that you should not try to do this on your own. A qualified estate planning attorney can walk you through all of this very quickly.
The current estate tax exclusion is $5.25M for each spouse. If the planning is done right, no taxes should be incurred for a total estate less than $10.5M at the second death.
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The decision as to what type of trust to create should be made after consulting qualified counsel.
While a bypass trust does limit itself to income for the survivor there is usually a provision that allows the bypass trust principal to be invaded if the assets of the survivor's trust have been exhausted.
Taxes could occur if the survivor is not a citizen, otherwise there is an unlimited marital deduction for assets going to a surviving spouse. Who takes your property after death should be written into the trust.
I agree that you should discuss your estate planning with an attorney. It is clear that you have been doing your research, which will help you in your discussions. Many attorneys provide a free initial consultation where you can have many concepts, like the ones in your question, explained. If after you talk, you decide not to hire the attorney, you have still gained valuable knowledge. Therefore, I recommend you consult with one or more estate planning attorneys.
One option you may not be considering is a trust that gives the survivor the option to divide the trust into a survivor's trust and exemption trust on the death of the first spouse. Whether this is a good option for you depends on many factors that cannot be covered in a short message.
Good luck with your estate planning.
Hi there. You are on the right track, but let me suggest a different path.
I set up what is called a "disclaimer trust." This is a bypass trust, but it is only funded after the first of the trustors dies. The survivor has the statutory period (state law) to examine the tax law, and the estate values, and chose to disclaim some or none of the deceased's assets. If the survivor does disclaim, then the disclaimed assets go into the disclaimer/bypass trust.
This is a more flexible way to make way for tax planning. While the federal tax exemption is currently at $5M, it may be lowered in the future, and at least some states have much lower exemptions to maybe be concerned about.
There are many good reasons to proceed with getting your estate planning done, and through a professional.
Holbrook & Associates LLC
Agree with colleagues. Best to hire a local attorney whose primary focus and interest is estate planning. There are many factors to consider (i.e. cost, attentiveness, knowledge) when making your decision. The most important question to ask yourself - "Can I see myself working closely with this attorney?" Best. Craig
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