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‘Tis the season . . . to address estate-planning needs

On Behalf of | Nov 17, 2020 | Estate Planning |

The holiday season is upon us. Christmas shopping has already begun in many St. George households, with decorations and meal-planning to be launched soon. Before things get truly hectic, there is still time to consider year-end estate planning tools that can benefit you and your loved ones far beyond the holidays.

Three years ago, the federal estate, gift and generation-skipping transfer tax exemptions were doubled from $5 million to $10 million. Indexed for inflation, the increased exemptions are $11.58 million this year.

Sunset provision

The increased exemptions are scheduled to revert back to $5 million (indexed for inflation) in 2026, but a change in administrations might speed up that reversion. Some observers believe it’s possible that the exemptions could even be decreased.

That presents high net-worth individuals with a possible use-it-or-lose-it scenario. The calendar doesn’t have many more remaining days for those who are planning to make use of the exemptions.

An alternative approach

For high-asset married couples uncomfortable with giving significant sums to descendants, there’s another way to take advantage of the existing exemptions: create a spousal lifetime access trust that’s funded with a gift at the current exemption amount.

The other spouse can do virtually the same, however, it’s important to share a point made in a recent National Law Review article on these trusts: “It is critical that the trusts are not exactly identical in order to avoid application of the ‘reciprocal trust’ doctrine.”

Of course, there can be many other estate-planning issues that can be readily resolved before 2020 turns into 2021.