Online resource center to help you explore these key issues, and others, regarding your estate.

Practice Areas

Mr. Miller has many years of experience in designing and implementing a comprehensive variety of Trusts, Wills, and other estate planning documents, as well as settling estates in the most expedient and appropriate method. Further, he counsels and assists clients on becoming eligible for VA benefits and Medi-Cal.

Learn more
VA Pension/Aid & Attendance/Medi-Cal

Mr. Miller has been active in the area of VA Pension and Medi-Cal for well over a decade. He uses various specialized types of Trusts as well as non-trust strategies to gain eligibility for his clients and save the family money.

Learn more
Probate & Estate Administration

Mr. Miller has been settling estates (both simple and complex) for well over 40 years. The starting point is always to create a strategy to settle the estate in the most efficient manner possible with a minimum of taxes. Often times the strategy created allows the family to bypass Probate Court proceedings.

Learn more

Your Estate Plan is a Tax Plan…


By merv,

  Filed under: Blog, Estate Planning

Often clients think of their estate plan as a set of documents dictating how their property will be distributed and who will take care of it.  Many also realize that with the recent changes in the estate tax, far fewer people are affected by this tax than were before the Bush presidency.  In fact, the difference in the applicable exclusion amount went from $675,000 in 2000 to the current $5.12 million.  However, many estate plans that were drafted in the intervening time may be A-B Trusts.

Although there are reasons for having an A-B Trust besides estate tax planning, the most common use for them is to double the applicable exclusion amount for married couples.  Trusts drafted several years ago may have been set up as A-B Trusts for legitimate, useful estate tax planning purposes.  In the document, there is a paragraph that explains how to divide the property upon the first spouse’s death, often called the formula clause.  Generally, especially in older trusts, that formula is tied to the estate tax.

The formula clause is one of the complex, hard to explain areas of estate planning.  Fortunately, we now have a case to show just how important it is to review the formula in your trust.  Enter the Tweten family!  California mega-millionaires Leonard and Eileen Tweten created an estate plan to deal with their $100 million estate in 2008.  They had, essentially, an A-B Trust tied to the applicable exclusion amount.  When Eileen Tweten died in 2010, it just so happened that the exclusion amount was infinite, because the estate tax was repealed for that year only.  This means that, rather than $2 million (the applicable exclusion amount when they created their plan) being segregated and, according to their plan being immediately distributed to the children, Eileen’s full $50 million share would be distributed.

At the heart of the family battle that raged in probate court was whether the Twetens intended to immediately pass $50 million to their children upon the first spouse’s death or whether they intended to pass a smaller amount ($2 million), which would allow the Surviving Spouse to keep $98 million until his death.  The children argued that their parents’ plan hit the jackpot, saving the children potentially over $25 million in future estate tax.  The court ultimately ruled in favor of the Surviving Spouse.

Although the Tweten family had a vast estate, their predicament illustrates the need to review your estate plan annually.  The estate tax rules have been in a constant state of flux.  Many married couples have A-B Trusts that are unnecessary because the applicable exclusion amount has been increasing so dramatically and individual family wealth has decreased so dramatically.  Furthermore, even if your A-B Trust is still an appropriate plan, it may require an updating to the funding formula.

Consider the following example:  Husband and Wife have an estate worth $4 million in an A-B trust that was written in the early 1990’s, when the applicable exclusion amount was $600,000.  Similar to the Twetens, Surviving Spouse could wind up with $2 million (the surviving spouse’s half) of readily accessible assets rather than the planned $3.4 million ($4 million less $600,000).  In circumstances where there is a lot of separate property, the results could be more dramatic!  If your trust has not been reviewed in several years, you should take it to your attorney to verify that the type of trust, and the formula clause within it, is still appropriate for your situation.

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things… FREE REPORT: This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.

Comments are closed.

About Living Trusts

About Living Trusts is hosted by the Law Offices of Merwyn J. Miller, as your online resource center to help you explore these key issues, and others, regarding your estate.

Merwyn J. Miller, J.D.

  • Board Certified Specialist in Estate Planning, Trust & Probate Law
  • Co-Author of legal text book and of “Don’t Go Broke in a Nursing Home
  • Teacher of law courses at public and private colleges
  • Continuing Education Instructor for attorneys
  • Columnist for largest regional newspaper in San Diego County and professional journals for 15 years, Contributing author to the book “In Your Service: The Veteran’s Friend”
  • Masters Degree in Financial Services - Estate Planning
Amazon
Journals
News
Testimonials

Previous Next
Free Consultation

Call 760-389-1308


Math Captcha 16 − = 10
In light of recent events, we have closed our physical office and our staff is continuing work remotely. We have web conference and telephone available to our clients. For more information, please reach out to us today.Contact us