Is My A-B Trust Obsolete?

Some say that since Congress raised the amount individuals can leave their heirs to $5 million and spouses can combine their exemptions up to $10 million without incurring estate or gift taxes, the A-B Trust is obsolete.  This Wall Street Journal article: Does Your Trust Need a Tune up? discusses some of the issues.  While there may be very good reason to think twice before using an A-B trust in 2011 and 2012, what happens after 2012?  As we learned in 2010, that’s anybody’s guess.

Rather than rewrite the A-B trust for a two-year period, there are other methods to deal with the situation. Furthermore, there are still many good reasons to keep the A-B configuration regardless of the estate tax disadvantage. In addition to their use in estate tax planning, they can be used for other purposes, including protecting trust assets from the surviving spouse’s creditors and offering the first spouse to die a degree of control
over the final disposition of trust assets. While we recommend clients revisit their estate planning every few years, a knee-jerk reaction to temporary changes in the tax law seems
counter-productive.

If you have questions about your estate plan, take a look at our Estate Planning FAQ.  Be sure to consult an experienced estate planning attorney.  Question #3 deals with how often an estate plan should be reviewed.Question 16 discusses how to find a competent attorney when moving to a new city or state.