estate tax

When should you amend your trust?

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Many times people create trust during their lifetime and they face situations that may require amendments to the trust.  If changes are required to your trust, a trust amendment is the proper way to make the changes. Handwritten marks and notes on the trust document are not considered legal changes. An amendment specifically states what paragraphs of your trust is being changed, and sets forth the new trust language. The amendment may be short, or it may be so drastic that it actually changes the entire trust, from the first word to the last.

What are some reasons why you may need to amend your trust?  Some trusts are completely out-of-date, or irrelevant due to changes in the statutes, case law, or just poorly written. Some trusts may have provisions that are illegal, or contrary to the client’s wishes. Some people need their trusts revised or updated because of changes in their wealth or family circumstances.

Lengthy or complicated trust amendments may be difficult, costly, time consuming and hard to follow for future trustees. Therefore, a good estate planning attorneys will recommend a trust restatement. A trust restatement is a document which completely restates the entire trust agreement, and a new trust is created through the amendment and restatement.

Although a restatement is basically a new trust in the form of a trust amendment, the name of the old trust and the date that it was established remain the same.  Therefore, there is no need to obtain a new tax identification number, move funds to new accounts, change deeds, etc.

With the many tax law changes in recent years, concerns about future ill health and incapacity, or with changes in your family situation, it is recommended to have your trust reviewed by an attorney. A simple amendment may be all that is required or it may be necessary and more efficient for the attorney to restate the entire trust.

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What is the future of the estate tax?

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The estate tax is a tax imposed on the transfer of a person’s assets at death, irregardless of whether such property is transferred by will, according to the state’s intestacy rules, through a trust, or by life insurance.   A certain amount of each estate is exempted from taxation by the federal government. The exemption amount for 2012 is $$5,120,000 at a 35% tax rate for all amounts above that and in 2013 the exemption amount goes down to $1,000,000 at a 55% tax rate.  There have been numerous laws passed which have made only temporary changes to the estate tax exemption amount and estate tax rate, however, Congress has failed to provide for any real permanency with regards to the estate tax. 

In this election year, it is clear that both the President and Congress will drag their feet to wait until the last-minute to deal with the expiration of the 2010 Tax Relief Act.  Nonetheless there are several directions that Congress could go in after this fall’s elections, which include doing nothing and allow the tax to remain at 55% on anything over $1,000,000, extend the current tax act, compromise, or repeal the estate tax all together.  Most estate planning professionals will tell you that it is anyone’s guess what the boys and girls in Washington will do in the Fall Session, while the rest of the country just waits.  Politics as usual!