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“New Paradigm” in Estate Planning
Tuesday, January 12, 2016

On January 11, I posted information regarding what some refer to as the "new paradigm" in estate planning, i.e., the shift from estate tax planning to income tax planning. Below is a letter of explanation for clients as they consider revisions to their estate plans.

January 11, 2016
Re: Review of Your Estate Plan

Dear Client:

As we enter a new year, it reminds me that it has been some time since we last met to review and discuss your estate planning documents. I wanted to make you are aware of recent developments that may impact those documents.

For many of our clients, their estate plans were prepared at a time when the Federal estate tax exemption was much lower. Thus, estate plans often included a credit shelter trust (also known as a family trust or residuary bypass trust) that was intended to save estate taxes upon the death of the surviving spouse. Recently, however, the estate tax law was substantially changed and the exemption from Federal estate tax was permanently set at $5 million per person, indexed for inflation, above which a flat estate tax rate of 40% applies. For 2016, this exemption, as adjusted for inflation, is $5.45 million per person ($10.9 million for a married couple). In addition, married couples are now permitted to transfer any unused Federal estate tax exemption to a surviving spouse by way of a new concept known as "portability". The final regulations for "portability" were recently published. Thus, for some clients, the estate tax planning involving credit shelter trusts may no longer be necessary and in fact such planning may result in unnecessary income taxes.

Therefore, you should review your estate planning documents and financial situation to determine whether your planning should be revised to reflect these recent changes

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