We are married; we already have a Trust.
Does it need revision due to the new 2001 Tax Law?
If you have a Trust using a formula which refers to the maximum tax free amount, it
may need to be reviewed.
If you are married, in a first marriage with one set of kids, you are probably OK. The
typical Trust for a married couple is an A-B-C Trust (more properly called a Survivor's
Trust; Bypass Trust; and QTIP Trust) where the Survivor gets life use of all of the funds
and what remains at her death is divided among all of their children equally. Although
there is a formula clause to make an allocation between the B and C Trusts, for most
couples the Trust does not need to be changed.
- Occasionally clients will not want to leave excessive amounts to children and
instead will be charitably inclined: "We are worth $2,000,000. We want to leave
$1,200,000 our kids and the taxable portion to charity, so the IRS gets
NOTHING, ha ha ha!"
- Under the new law, charity will get nothing because the taxable portion is nothing (because $2,000,000 is tax free in January, 2002). IF that is what the clients want, great, the Trust does not need change.
- Alternatively, if the clients are truly charitable, the Trust needs to be changed.