Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/a26f9f83/public_html/articles/includes/config.php on line 159
How to Reduce the Estate Tax Using the A-B Revocable Living Trust > NetSparsh - Viral Content you Love & Share

How to Reduce the Estate Tax Using the A-B Revocable Living Trust

In a past article I relayed the plight of the widow who stated:

"I didn't realize what an A-B Revocable Living Trust meant and that it had to be divided between the survivor and the deceased spouse and that I am limited as to what I can use from his share."

She told me that she only learned of this after her husband passed away. This is too late for many (there is a way to collapse an A-B Revocable Living Trust, which we'll talk about in another article).

First, what is an A-B Revocable Living Trust? I spend a great deal of time going over this in my free Multi-Media Course, available at http://www.livingtrustsecrets.com. Basically it is the splitting of a husband and wife's estate into two shares, his share and her share. The reason is to capture, or use, the estate tax unified credit amount that each spouse receives on death.

Let's explain. Since we know Uncle Sam likes to receive his inheritance too, whenever there is a death, we always need to ask "is there a tax?"

When we talk about taxes on death, we are talking about the federal estate tax (your state may also have a tax, sometimes called an estate tax or an inheritance tax. The difference is who is liable for payment of the tax? the estate or the inheritor? But let's not get side-tracked on the state tax. Let's stick with talking about the federal estate tax).

So let's say you have a "simple will." In a simple will, you will usually say "when I die, leave everything to my spouse." Very Simple.

Now, is there a federal estate tax? First, realize that the passing of property on death is a privilege and not a right. Therefore, it is taxable event. Even though it is a taxable event, however, the tax code tells us that everything that is left to our spouse is tax-free under what is called the "marital deduction." So, in our simple will example, there would be no estate tax since everything you leave to your spouse is tax free.

Uncle Sam is patient. He is willing to wait until the second spouse to die passes away. Now, he gets to collect his tax on the total of both shares: the husband's share and the wife's share.

What happened with the "simple will" is that you have wasted the federal estate tax unified credit amount (currently $1.5 million) that can be left tax free to anyone.

So, what the A-B Revocable Living Trust is designed to do is to capture and preserve the federal estate tax unified credit amount available when the first spouse dies. It does this by creating what is often called the "credit shelter" trust.

The "credit shelter" trust (the "B" trust in an "A-B" Trust) is an irrevocable trust that springs into being out of your Revocable Living Trust when the first spouse dies. This trust is designed to be managed by the surviving spouse for the benefit of the surviving spouse, without giving the survivor any "taxable incidents of ownership."

What this accomplishes is that upon the death of the second spouse to die, the assets that had been placed into the "credit shelter" trust are not considered to be owned by the second spouse to die. Therefore, they are not included in or taxed as part of the second spouse to die's estate.

This can often save hundreds of thousands of dollars, since the federal estate tax rate kicks in at 37% and goes up from there.

Good luck and until next time,

Phil Craig

P.S. Feel free to forward this on to any friends.

Phil Craig is a licensed attorney and entreprenuer. He started practicing law at age 25 in 1979. He does not take on any more clients, but is advisor to some of the biggest names in the internet world. He shares his knowledge gained over the last 25 years at his Living Trust Secrets newsletter site: click here=========>http://www.LivingTrustSecrets.com

** Attn Ezine editors / Site owners ** Feel free to reprint this article in its entirety in your ezine or on your site so long as you leave all links in place, do not modify the content and include our resource box as listed above.

If you do use the material please send us a note so we can take a look. Thanks.

In The News:

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

CBS News

Here's why you should prepare your taxes now
CBS News
Taxes may be inevitable, but taxpayers have some some wiggle room with when they file their returns. This year, the IRS opened its filing window in late January and won't close it until April 17. Even so, many Americans tend to wait until the last ...
Ask Brianna: What if I really need my tax refund?The Detroit News

all 55 news articles »

USA TODAY

4 signs you shouldn't do your own tax return
USA TODAY
Whether your business is a wild success or a gruesome failure, you'll have tons of extra documents to track and forms to fill out (including quarterly estimated taxes if you'll owe $1,000 or more in taxes at the end of the year, and those can be a ...


Bloomberg

Singapore Plans to Boost Goods and Services Tax to 9%
Bloomberg
Income from reserves and investments managed by GIC Pte, Temasek Holdings Pte and the Monetary Authority of Singapore is already the largest contributor to the government's overall revenue, estimated at almost S$16 billion in the fiscal year beginning ...
Singapore Is Hiking Its Sales Tax, but Not Until 2021 or LaterU.S. News & World Report
Hongbaos and taxes: 8 things you need to know from Budget 2018Channel NewsAsia

all 134 news articles »

CNN

Billionaire Bill Gates says he should pay 'significantly higher' taxes
CNN
"People who are wealthier tended to get dramatically more benefits than the middle class or those who are poor, and so it runs counter to the general trend you'd like to see, where the safety net is getting stronger and those at the top are paying ...

and more »

The Hill (blog)

Bill Gates says rich people like him should 'pay significantly higher taxes'
MarketWatch
Bill Gates said Sunday that ultra-wealthy people like him should be paying “significantly” higher taxes. “I need to pay higher taxes.” Bill Gates. “I've paid more taxes, over $10 billion, than anyone else, but the government should require the people ...
Bill Gates: People like me should have to pay higher taxesThe Hill (blog)
Bill Gates says "I need to pay higher taxes"ForexLive

all 16 news articles »

Forbes

The Best Tax Software
Forbes
Our budget pick, TaxAct Tax Software, is a great alternative. However, it's less intuitive and is geared toward those who already have a good working knowledge of filing taxes. Although it's less expensive, this pick offers solid security and is a ...


Hartford Courant

GOP Candidate For Governor: Yale Getting Off Cheap On Taxes
Hartford Courant
“Yale is dismayed that any civic leader would consider taxing nonprofits in Connecticut,” Yale spokeswoman Karen N. Peart said in an emailed statement. “Growing the economy is one of the most urgent challenges for the state, and strong colleges and ...


WCPO

I-Team: Hamilton County property owners owe millions in delinquent taxes
WCPO
Hamilton County Treasurer Robert Goering said that, during the last decade, state income tax collectors have filed three liens on the property totaling nearly $313,000. Goering has referred the Franks' delinquent property taxes to county prosecutors ...


5 Reasons Most Americans Will See Tax Cuts in 2018
Motley Fool
New tax reform laws have now taken effect, and millions of Americans fully expect to see big savings when they file their 2018 tax returns next year compared to what they've paid in previous tax years. Despite concerns that some will be disappointed ...

and more »

Revenue forecast puts legislative focus on taxes, McCleary
Peninsula Daily News
In the Senate, SB 6609 proposes to lower property taxes by creating new taxes on the sale of candy, on carbonated drinks, and on luxury automobiles, as well as reduce the threshold for estate taxation. Despite the passage of last year's bipartisan ...

and more »
Google News

Alas! In E-Commerce Taxland

In trying to comply with tax laws for your e-business,... Read More

Tax Trap #1 -- Waiting to Incorporate: What A Difference A Date Can Make

NOTE: This is the first in a series of 5... Read More

The Annual Gift Tax Exclusion: Getting The Edge

Whether helping the kids with a down payment on their... Read More

Understanding Basic Tax Terms

If your like many, you don't always understand what people... Read More

Truly Bizarre Taxes: The Tax on Illegal Drugs

One can never underestimate the enthusiasm that politicians have for... Read More

How to Check the Status of Your Tax Refund Online

So, you were pleasantly surprised to learn that you are... Read More

Tax Reform, My Way

We need real tax reform and we need it now.... Read More

Identity Theft ? Impacting Your Taxes?

If your identity is stolen, your finances can quickly become... Read More

Tax Investigation - What You Need To Do

The knock on the door from a Tax Inspector is... Read More

Tax Time Tune Up

Excerpted from the new book, "How to Do Space Age... Read More

I Havent Filed a Tax Return with IRS in Years, What Do I Do?

In elementary school, kids come up with creative excuses why... Read More

Small Business Tax Issues for Self-Employed Individuals

The United States is a nation of entrepreneurs. There are... Read More

Getting A Second Extension to File 2004 Taxes

Millions of people file tax return extensions every year. The... Read More

2005 Ford Escape Hybrid Certified For Clean-Fuel Deduction

If you are environmentally conscious and purchase a 2005 Ford... Read More

How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share

How Home-Based Businesses Can Avoid Giving Uncle Sam... Read More

Tax Reduction Tips

In the rush to get tax returns prepared and filed... Read More

IRS Offer-in-Compromise, Hype or Hope?

"Settle for Pennies on the Dollar! IRS debts settled for... Read More

Your IRS Tax Appeal Rights

Are you in the middle of a disagreement with the... Read More

Small Business Tax Deduction - Write-Off Bad Debts

Practically every small business has receivables that it cannot obtain... Read More

Deducting Points On Home Refinances

Deduction of Refinance PointsAny points that you pay in the... Read More

10 Thoughts on Tax Offer in Compromise

Beware of advertisements that claim to settle tax debts for... Read More

Seven Key Tax Deductions for the Self Employed

As a sole proprietor, it's wise to familiarize yourself with... Read More

Requirements To Produce Tax Information (Whats Up With That?)

"What we've got here is a failure to communicate." ... Read More

Understanding Marketing Tax Deductions

Marketing is a necessary expense in running practically any business... Read More

Correspondence From The IRS ? Yikes!

It's a moment every person dreads. You pick up the... Read More