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Can I avoid estate taxes with a basic living trust?

Nolo
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Question:

Can I avoid federal estate tax by granting my wife and two adult children 50%/ 25%/ 25%, respectively, through a revocable living trust, rather than setting up an AB irrevocable trust?

Answer:

A basic revocable living trust does not reduce estate taxes by one red cent; its only purpose is to keep your property out of probate court after you die. Nor can you accomplish this trick by creatively juggling the percentages of your property each family member will receive.

On the other hand, an AB ("bypass") trust is designed to save on estate taxes by leaving some property to your children, but allowing your surviving wife to use it (and any income it produces) during her lifetime. That way, she does not legally own the property, and it won't be subject to estate tax at her death.

However, married couples can transfer a ver large amount of assets--$10.86 million in 2015--without owing federal gift or estate tax. This ability to combine each spouse's individual estate tax exemption is called "portability." For most couples, this eliminates the need to create an AB trust to avoid estate tax.

Read more about AB Trusts.

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You should not send any sensitive or confidential information through this site. Any information sent through this site does not create an attorney-client relationship and may not be treated as privileged or confidential. The lawyer or law firm you are contacting is not required to, and may choose not to, accept you as a client. The Internet is not necessarily secure and emails sent through this site could be intercepted or read by third parties.

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