| Alan R. Horvath, Attorney at Law |
| Using a Trust for Estate Tax Avoidance |
Both the state and federal governments have imposed a tax on the estate of a deceased individual. For 2010, this
tax has been repealed, however it is expected to be reinstated in the year 2011. The estate tax is set up to exclude
from taxation a portion of the estate up to the exclusion limit. The limit is a political football and has changed
significantly over the years. However, because it is probable that an estate tax will remain long term, it is useful to
understand how a trust can help avoid tax for a married couple.
A married couple represents two people, and can therefore potentially take advantage of two estate tax exclusions.
However, in order to do so, the amount excluded at the time of the first death, may not remain the property of the
surviving spouse. By putting it in trust instead of leaving it to the surviving spouse, it is possible to shelter funds using
the exclusion at the first death, still make the money available to the surviving spouse, but not have it considered for
estate taxes at the second death.
Example.
At current exclusion levels, this is an issue that is relevant only to fairly large joint estates. Also note that the
downside of taking advantage of this approach is that the surviving spouse may not have complete access to the
funds thus sheltered.
tax has been repealed, however it is expected to be reinstated in the year 2011. The estate tax is set up to exclude
from taxation a portion of the estate up to the exclusion limit. The limit is a political football and has changed
significantly over the years. However, because it is probable that an estate tax will remain long term, it is useful to
understand how a trust can help avoid tax for a married couple.
A married couple represents two people, and can therefore potentially take advantage of two estate tax exclusions.
However, in order to do so, the amount excluded at the time of the first death, may not remain the property of the
surviving spouse. By putting it in trust instead of leaving it to the surviving spouse, it is possible to shelter funds using
the exclusion at the first death, still make the money available to the surviving spouse, but not have it considered for
estate taxes at the second death.
Example.
At current exclusion levels, this is an issue that is relevant only to fairly large joint estates. Also note that the
downside of taking advantage of this approach is that the surviving spouse may not have complete access to the
funds thus sheltered.
| Phone: 209 754-5291 Fax: 209 754-5293 |
| ahorvathlaw@sbcglobal.net |
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P.O. Box 81
596 Mountain Ranch Rd.
San Andreas, CA 95249
596 Mountain Ranch Rd.
San Andreas, CA 95249