Is My A/B Trust Obsolete?
A revocable living trust is a valuable tool to protect and preserve your assets both for you, your children and future generations. A living trust can help you avoid the unnecessary costs and delays associated with Probate and can help you minimize or avoid estate and inheritance taxes.
Like any plan, your living trust should be reviewed periodically to ensure that it properly reflects your wishes for your heirs, but also to make sure you don’t lose any of your advantages due to changes in tax and other laws.
Let’s take A/B and A/B/C style trusts. Up through at least 2004 to 2007, the vast majority of living trusts created for married couples were created in the A/B or A/B/C style format. The prominent features of these types of trusts are built-in mechanisms to help minimize or avoid estate taxes. In order to then fully utilize these features, a costly and time consuming administrative process would be required upon the death of the first spouse. Under the tax laws effective in those years, these costs of administration would usually be well worth the time and expense. The problem is that if your estate is such that you don’t need the tax benefits these mechanisms were designed to provide at the time the first spouse dies, you still have to undergo the costly and time consuming administration, or else find yourself with your hands severely tied in decisions regarding the ongoing management of your assets and the disposition of your estate.
At the beginning of 2011, we saw significant changes in the tax laws that should motivate all couples with an A/B or A/B/C living trust to review their trust with a qualified professional. There are opportunities to update your trusts to take full advantage of tax savings benefits without the requirement for the traditional costly administration.