Page 34 - Southern Exposure - March '25

Page 34, Southern Exposure

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Does Your Revocable Living Trust

Reduce Your Federal Estate Tax Bill?

By Anné Desormier-Cartwright, J.D., Esq.

Many believe that Do You Need a Revocable Living Trust? Final Thoughts On Revocable Living Trusts And Estate
once they set up and fund If a revocable living trust does nothing to reduce your Taxes
a revocable living trust, federal estate tax bill that cannot be done by holding the For many people, a revocable living trust is the ideal
property held in the trust will assets in your own name, why should you consider setting way to organize their final affairs. While the estate tax
completely avoid federal one up? There are at least three good reasons: avoidance tools used by a living trust are not exclusive
estate taxes after they die. 1. To avoid probate. Assets held in your revocable to such trusts, they can be incorporated into a trust-based
A living trust does not living trust at the time of your death will avoid the court estate plan to capture the general benefits that living trusts
provide any unique estate proceeding known as probate. Depending on your state offer and provide equally important additional benefits
tax avoidance strategies. of residence at the time of your death, this could save a unrelated to tax savings.
The primary mechanisms great deal of time and thousands of dollars in legal fees If you are interested in learning more about a revocable
for reducing estate taxes— and court costs. living trust and its benefits for you and your loved ones,
the unlimited marital 2. To plan for mental incapacity. If you become call us.
deduction and the charitable deduction—apply whether unable to manage your affairs while you are still alive, If you have questions about your estate plan and what
money or property (sometimes referred to generally as the successor trustee you name in your revocable living documents you should have in place to plan your estate,
assets) are held in a trust or held directly by an individual. trust will be able to manage trust assets for your benefit schedule a free consultation today by calling our office at
The unlimited marital deduction allows the transfer of without the need for court involvement. Like the benefit (561) 694-7827, Anné Desormier-Cartwright, Esq., Elder
assets to a U.S. citizen surviving spouse free from estate of avoiding probate discussed above, removing the need and Estate Planning Attorneys PA, 480 Maplewood Drive,
tax, while the charitable deduction permits tax-free for a court-supervised guardianship or conservatorship Suite 3, Jupiter, FL 33458.
transfers to qualifying charitable organizations. These could save time and thousands of dollars in legal fees and The content of this article is general and should not be
deductions are not exclusive to living trusts but can be court costs, depending on your state of residence. relied upon without review of your specific circumstances
incorporated into a trust-based estate plan to ensure that 3. To keep your final wishes private. A revocable by competent legal counsel. Reliance on the information
assets are distributed tax-efficiently. living trust is a private agreement that remains private herein is at your own risk, as it expresses no opinion by
Before delving into estate tax planning, it is important after you die. In most cases, the only people who will the firm on your specific circumstances or legal needs.
to understand that estate taxes come into play only when need to know the terms of the trust and what will occur An attorney client relationship is not created through the
someone gifts assets during their lifetime and at their during administration are the trustee and your named information provided herein.
death that combine to exceed a certain threshold value. beneficiaries. Usually, this document is not required to To comply with the U.S. Treasury regulations, we must
This threshold is called the federal lifetime exclusion be filed with the court, which will prevent strangers from inform you that (i) any U.S. federal tax advice contained in
amount and is currently $13.99 million for 2025. Unless knowing what you own and how you want what you own this newsletter was not intended or written to be used, and
the trustmaker and the trustmaker’s revocable living trust to be distributed and managed. cannot be used, by any person for the purpose of avoiding
have combined assets exceeding this amount, there will U.S. federal tax penalties that may be imposed on such person
likely be no federal estate tax due at a trustmaker’s death. and (ii) each taxpayer should seek advice from their tax
However, for purposes of this article, we will assume advisor based on the taxpayer’s particular circumstances.
that the trustmaker’s assets owned individually and in
the revocable trust are valued at more than the lifetime
exclusion amount.
Caution: If you live in a state with a state estate tax, you
need to work with an experienced estate planning attorney
to ensure that these concerns are addressed appropriately,
as state estate tax thresholds are often lower than the
federal threshold and may require additional planning.
Single Trustmakers And Estate Taxes
Of the two planning strategies mentioned above—the
unlimited marital deduction and the charitable deduction—
only the charitable deduction tool is available to single
individuals. With this tool, all assets in a person’s trust
left to qualifying charitable organizations will be removed
from the trustmaker’s taxable estate. On the other hand,
the assets left to noncharitable beneficiaries will likely
be exposed to federal estate tax liability if the remaining
assets exceed the current federal exemption amount. In
other words, if your beneficiaries are your children, your
brothers and sisters, your nieces and nephews, your best
friend, another trust, or even a for-profit business, then the
property they inherit through the trust could be subject to
federal estate tax depending on the size of your remaining
estate. Otherwise, any property distributed to qualifying
charitable organizations through the trust passes free from
federal estate tax.
Married Trustmakers And Estate Taxes
Married couples have both the charitable and unlimited
marital deductions available to them. The charitable
deduction functions the same way as described above for
the single individual. With the unlimited marital deduction,
all qualifying transfers of assets held in your trust that pass
to your U.S. citizen spouse after your death will likely
not be subject to estate taxes due to the unlimited marital
deduction. However, to be deemed a qualifying transfer,
the assets must either pass to the spouse outright or be
held and administered in a special type of trust for your
spouse’s benefit.
On the other hand, if you are married and you create and
fund a revocable living trust and name both your spouse
and your children as current beneficiaries after you die, the
portion of the trust passing to your spouse (utilizing the
unlimited marital deduction) will likely not be subject to
federal estate tax, and the portion passing to your children
may be subject to estate tax (depending on the value of the
assets and the federal lifetime exclusion amount available to
you when you pass). If you include one or more qualifying
charitable organizations as beneficiaries, the portion passing
to the charities will likely not be subject to estate tax.