ABC TRUST PLAN OFFERS ADDED PROTECTION FROM GST TAX

very competent estate planner knows that estate planning begins well before either spouse dies. The estate plan that is put into play will have a great impact on how much will be paid in transfer taxes and how much remains for the benefit of the family. This article examines two common estate plans...

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Bibliographic Details
Published inPractical Tax Strategies Vol. 93; no. 1; p. 17
Main Authors Hoffman, Michael J R, Lauderdale, Mitzi K, Bost, John C
Format Trade Publication Article
LanguageEnglish
Published Boston Thomson Reuters (Tax & Accounting) Inc 01.07.2014
Subjects
Beneficiaries
Children & youth
Estate planning
Estate taxes
Flexibility
Funding
Generation skipping tax
Marital deductions
Tax returns
Transfer taxes
Trusts
United States > US
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Summary:very competent estate planner knows that estate planning begins well before either spouse dies. The estate plan that is put into play will have a great impact on how much will be paid in transfer taxes and how much remains for the benefit of the family. This article examines two common estate plans from the perspective of planning for the possibility that the generation-skipping transfer (GST) tax might apply when the estate plan unwinds. The estate plans that are considered are the A/Super-B trust plan and the ABC trust plan. Both of these plans offer the executor of the first spouse's estate the opportunity to make post mortem modifications to the plan, as circumstances dictate. This flexibility comes primarily in the form of the QTIP election. The executor of the first estate has until the extended due date of the first spouse's estate tax return (15 months after the date of death) to decide if, or to what extent, a QTIP election should be made. What this article makes clear is that, when consideration of the GST tax is on the table, all estate plans are not created equal. By means of a hypothetical case, an ABC trust estate plan is shown to offer substantial upside benefit, with minimal downside risk. That is, if an out-oforder death of a child makes dealing with the GST tax a necessity, the ABC plan provides much better results. On the other hand, if the GST tax turns out not to be an issue, the ABC plan does not result in any adverse consequences for the beneficiary of the estate plan.
ISSN:1523-6250