For years, estate planning attorneys have recommended so-called A/B estate plans for married couples.
But an article on morningstar.com says such plans if put into place years ago could have negative tax consequences. It suggests reviewing your estate plan just in case.
A/B plans divide an estate into two parts. Actor Humphrey Bogart used one. He left all of his personal possessions to his wife, Lauren Bacall. He provided that after gifts to his personal servants were dispensed, half of his estate would go into a trust for Bacall (Part A.)
Taxes would come out of the other half of the estate. Whatever remained would go into a separate trust (Part B) for their children. It is called a bypass trust.
But tax law changes that took effect in 2013 made another alternative more appealing, the story says, but only for couples in stable marriages who trust each other with managing their joint wealth. These couples leave all their assets to each other directly in “I love you” wills. Then, the surviving spouse can carry over the spouse’s exemption, something called portability.
At current rates, this allows married couples to transfer $5.43 million apiece ($10.86 million total) tax free.
Best to talk to your estate planning attorney about which method is best for you.
If you have questions about estate planning, feel free to call us for a consultation at (626) 696-3145.
