Even More Potential For Reducing Estate Tax With A Family Trust or B Trust
It’s possible their savings could be even more. An additional benefit of the B Trust: since the estate tax calculation was applied upon the funding of the trust, the assets in the B trust will never have another estate tax assessment, no matter what they may grow to in the future.
In our example, assume Sue never used any of the $2 million in the B trust, and ten years later, those assets had grown to $3 million. (Which would happen if assets were earning a 4.13% rate of return).
Now upon Sue’s death, all $3 million in the B trust passes along, free of estate tax, in addition to Sue’s $2 million.
If no planning had been done, this $5 million estate would owe over $1.3 million in estate taxes.
Estate planning pays off big. Attorney’s fees can pale in comparison to the amount of estate tax that your estate may owe someday.
If you’re not sure if your estate is large enough to warrant this type of planning, and you don’t want to see an attorney yet, then start by asking your accountant or financial advisor. Although they can’t give legal advice, they should be able to steer you in the right direction.
It’s also possible upcoming tax reform may change the need for such complex planning. Both presidential candidates in the 2008 election are looking at allowing the unified credit to carryover between spouses, so such complex planning is not required to use the credit.