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“In This World Nothing Can Be Said To Be Certain, Except Death And Taxes.”

“In this world nothing can be said to be certain, except death and taxes.”

When it comes to death and taxes, Benjamin Franklin hit the nail on the proverbial head when he said that both were inevitable. Given this truth, many individuals are concerned with their estate being passed on according to their wishes while at the same time having the government take the smallest tax bite as possible. Many will find relief with the recent passing of the American Taxpayer Relief Act (ATRA), but they should be aware that all of their concerns may not have been removed.

Through the ATRA, the federal government made what is known as portability, permanent (or until new legislation is introduced). Portability is an estate planning tool that allows a second spouse to utilize any unused federal estate tax exemption from their deceased spouse and add it to his or her own estate tax exemption. With each individual having an estate tax exemption of $5.25 million ($10.5 million for a couple), it would seem that an individual’s concerns surrounding death and taxes would be subsided. But should they be? While portability is beneficial, it does not cover all concerns an individual may have regarding their estate and taxes. Traditional estate planning vehicles, such as a bypass trust (credit shelter trust), may still be essential tools when one develops an estate plan.

Similarly, both portability and a bypass trust allow an individual/couple to utilize their federal estate exemption to shield their estate from taxes. However, here is where the differences emerge between portability and bypass trusts.

For starters, portability only applies for federal estate tax purposes; it does not apply to state estate taxes. This means that at the federal level your estate may not be subject to tax, but at the state level you may be subject to estate taxes. Utilizing a bypass trust will allow you to use the state estate tax exemption at the passing of the first spouse, thereby reducing the overall estate tax liability upon the passing of the second spouse.

Additionally, bypass trusts provide protection over the assets you leave in trust for your beneficiaries from would-be creditors. It can prevent an inheritance from being eroded by lawsuits or ex-spouses. Portability does not provide this protection, nor does it ensure that your estate is ultimately left to your desired beneficiaries the way a bypass trust will. This may come into play when a surviving spouse remarries and commingles his or her assets (and yours) with their new spouse. A bypass trust prevents your assets getting into hands of someone you did not intend.

So while the “permanence” of portability is a benefit, it does not make a bypass trust irrelevant. In fact, it may shine a light on all of the additional benefits that come with the use of a bypass trust when one looks to plan for both death and taxes. Therefore, do not sit there waiting for the inevitable death and taxes, talk with a Wealth Advisor and an estate planning professional today to make sure your estate plan is in good order.

 

Important Disclosure Information

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This article is not a substitute for personalized advice from RegentAtlantic.  This information is current only as of the date on which it was sent.  The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic.  Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

Please remember that RegentAtlantic does not provide legal advice. Please consult with an estate planning attorney of your choosing prior to implementing any of the strategies discussed in this article.

This article is based on our current understanding of tax legislation. Congress may change this legislation at any time.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

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