Living Trust With No B Assets

[justalayman]

Heggstedt petition

 

[Taxing Matters]

okay, sounds good. i am happy to stand corrected on the estate tax revenue. i would have thought it would be considerably higher. at least when the unified credit was 600,000. i can see with it being 5 million, that it would not be that high, because the number of people being taxed would be somewhat miniscule.

Even when the unified credit was $600,000 the estate tax didn't amount to much in terms of the total revenue collected. In 1997, when the unified credit amount was $600,000, the estate and gifts taxes collected were 1.4% of total revenue, so about double the contribution to total revenue than last year, but still a very small slice of the total tax revenue. (Note, too, that in 1997 the top estate tax rate was 55%, in 2017 it was only 40%). So even when the estate tax applied to more people and the rate was higher, it still didn't account for much of the total revenue.

The estate tax was more significant prior to World War II because the income tax before that time didn't affect most households like it does today. The need for revenue during the war greatly expanded the reach of the income tax, and even after the war ended that greater reach stayed. The biggest argument for keeping the estate tax today is not that it raises a lot of revenue, but that it helps to break up extreme concentration of wealth in families so as to lessen the rather sharp disparity in wealth in the country between the top 5% and everyone else. I'm not expressing a view on the issue of narrowing the wealth gap, just saying that's the main argument made in support of it these days.

with regards to the credit shelter part of it, i think there is a much better chance of it coming back into play. if you are a young couple, with possibly decades to live, then i think there is a decent chance of having it play a role in their lives.

The credit shelter trust is not needed today because the tax law was changed to allow a married couple to get the same benefit by simply making an election. So even if a couple has assets over the unified credit amount, a credit shelter trust is not needed to make full use of both spouses’ unified credit. That election is not going to go away. Eliminating it would not change the amount of revenue the government gets after all. All it would do is force people to go to lawyers like me to get credit shelter trusts again to do the same thing. So there is no incentive for Congress to get rid of the election. There simply wouldn't be anyone asking Congress to do that. That's why I'm saying that it's not likely that credit shelter trusts are going to be needed in the future.

one thing i learned early on is i did not want to saddle my beneficiaries with a trust document in which 1/3 of it was completely useless stuff talking about how to take care of the grantors. an a/b trust has even more stuff in it that is useless to the beneficiaries.

Right. One of the reasons for not using sample trust documents on the internet: they likely will have stuff in them you don't need and don't have stuff you do. And, of course, they may be badly written and/or lack things that the person's state law would require. It costs more initially to get a good trust drafted by a lawyer, but can save the person whole lot more money and aggravation later over using a badly done form off the net.

 

[TrustUser]

sounds good. btw, i did not mean to imply that my trust docs were simply forms off the net. i did my own research, and formulated my own trusts. i guess it is up to interpretation as to how good they are - LOL. of course, i think they are great !!

 

[TrustUser]

p.s. it is my opinion that most trusts off the net are fine for use, if the intention of the grantor is to fully distribute the trust assets upon death. i look at these sorts of trusts as glorified wills. their only real purpose is to avoid probate. most on-line trusts do this fine and dandy.

it is when the trust is gonna stay alive after death, when one needs to be concerned about all the bells and whistles that are needed/helpful for the trustee to properly manage the trust.

 

[TrustUser]

oh yes, and thank you for the info about the spouse's election. i hadnt kept up with that, so i was not aware of that rule.

 

[Taxing Matters]

sounds good. btw, i did not mean to imply that my trust docs were simply forms off the net. i did my own research, and formulated my own trusts. i guess it is up to interpretation as to how good they are - LOL. of course, i think they are great !!

I didn’t mean to imply that yours were off the net — the info on getting trusts off the net was for others reading this thread. I should have made that more clear.

oh yes, and thank you for the info about the spouse's election. i hadnt kept up with that, so i was not aware of that rule.

Not many people are aware of it. Not surprising given that the estate tax now applies to so few estates anymore. It wasn't something that was reported widely, if at all, in general news reports at the time. I learn of this stuff since I subscribe to a comprehensive tax law news service that gives me daily updates on new tax laws, tax regulations, tax related court decisions, and IRS rulings and other guidace. The service is expensive, but invaluable to me for tax practice. Although I get to deduct the cost as a business expense, which takes away a bit of the bite of the cost of it.

 

[TrustUser]

we had been concentrating solely on the unified credit within the a/b trust. we havent said anything about a very important reason for an a/b trust.

and that is allowing the deceased grantor the ability to name his beneficiaries with his half of the assets.

it would not be the first time that an after-death marriage greatly changed the beneficiary designation.

 

[Taxing Matters]

There are certainly situations in which the use of two trusts would be useful. But until we know what it is that the two trusts the OP had were supposed to do and what it is he/she wants to do now, there is no way to know what might be the best thing to do. All I can tell the OP for sure at this point is that a trust that has no assets is pointless. The OP now doesn't want to fund that second trust, and how much of a problem that is depends on how the current arrangement is set up, why it was set up that way, and what the OP's present goals are.