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

Cherry Hill Courier Post

LETTER: Taxes, liberty and liberals in New Jersey
Cherry Hill Courier Post
New Jersey is the most expensive state in the country to live, where the solution to everything is to raise taxes. There is no revenue problem; taxes are too high and the cost of living is unaffordable – even state pensioners don't or can't afford to ...


USA TODAY

Donald Trump's China tariffs will tax Americans
USA TODAY
That might or might not prove true. One thing is certain: These tariffs, which come on top of a previous round affecting $50 billion in imports, will hit American consumers in the pocketbook. A tariff is essentially a sales tax on merchandise from a ...

and more »

CBS News

Tiffany Haddish: The IRS should send a thank-you note for paying taxes on time
CBS News
"I want to know, how come I pay my taxes on time every year all the time, and even if I'm a little bit short, you always send me a notice to remind me that I'm short or that I never to pay a little more?" the comedian said. "But you never, ever, ever ...

and more »

KING5.com

Soda companies spend millions to stop future soda taxes in Washington
KING5.com
An effort largely supported by big soda companies to block future soda taxes from being implemented is underway in Washington state. Initiative 1634, nicknamed "Yes! To Affordable Groceries," has already raised more than $13 million with major beverage ...


MarketWatch

Opinion: You can minimize the tax hit when you die — with a little planning
MarketWatch
There can be a lot of taxes upon one's passing, or very little, depending on the circumstances. Q.: My brother, my mother and I are trying to figure the best way for her to leave what she has in cash for us without it being taxed too heavily. We are ...

and more »

Forbes

Escrow Taxes And Insurance, Or Pay Them Yourself?
Forbes
Mortgage lenders generally require borrowers to include taxes and insurance premiums in their monthly mortgage payments. The additional payments are placed in escrow until the payment dates when the amounts due are paid by the lender.


AZCentral.com

You likely won't get a Maricopa County tax statement — here's why
AZCentral.com
Property tax bills are out in metro Phoenix. But most homeowners won't know if their taxes climbed until they see a bigger bill for their monthly mortgage payment. The Maricopa County Treasurer's Office doesn't mail out annual property tax statements ...

and more »

Raising taxes won't affect climate change
Walla Walla Union-Bulletin
A few months back I wrote that a carbon tax against fossil fuel related companies by our state would do absolutely nothing to affect our climate and would be disastrous for Washington citizens, especially the poor who would have to pay 14 cents more ...

and more »

St. Augustine Record

Candidate for governor paying extra taxes on home
St. Augustine Record
TALLAHASSEE — During his bid for governor, Democrat Andrew Gillum has reminded voters constantly that he isn't a millionaire like some of the other candidates who sought the office. But a review of property and tax records shows that Gillum is paying ...
Andrew Gillum pays extra taxes on his Tallahassee home, records showTampa Bay Times
GUEST EDITORIAL: The downside to Florida's low taxesThe Northwest Florida Daily News

all 77 news articles »

Muncie Star Press

City of Muncie agrees to pay back taxes on former neighborhood pool
Muncie Star Press
MUNCIE, Ind. — The city of Muncie has agreed to pay delinquent property taxes on a former neighborhood pool to allow time for its possible transformation into a city park. The Muncie Redevelopment Commission met Thursday and agreed to pay $18,070 in ...

Google News

Tax Audits: What Signs Make You More Likely to be Audited by the IRS?

It's a major fear for most Americans: A notice from... Read More

How To Claim CHILD TAX CREDIT The Right Way And Add An Extra $2,000 To Your Refund

The U.S. Department of Agriculture estimates that it costs nearly... Read More

IRS Offer-in-Compromise, Hype or Hope?

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

Need an Offshore Sales Office in a Tax Free Environment?

The 100 year old investment-banking firm of... Read More

IRS Lock-In Letters ? What?s An Employer To Do?

Employers often ask employees to designate the amount of tax... Read More

10 Thoughts on Tax Offer in Compromise

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

About Income Taxes; Tidbits

1812The first attempt to impose an income tax on America... Read More

Tax Trap #2 -- Double Taxation: Isnt Once Enough?

Have you been thinking about incorporating your small business or... 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

Tax Deductions - Mr. C.P.A. Can I Deduct a Pizza? You Too Can Deduct Your Fun By Using Tax Tips

Recently, I stumbled across a concept that could change your... 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

Paying Workers ? What Can You Write-Off?

As your business grows, you are going to need help.... Read More

Tax Deduction for Alimony Payments? - Yes!

Over 50% of marriages end in divorce in the United... Read More

Tax Records - What You Should Keep And For How Long

Many taxpayers are confused about how long they should keep... Read More

Knock-Knock-Knock

Knock-Knock-KnockWho's there?The IRS!The next quarterly payment of estimated income tax... Read More

Surprising Truths About Tax Preparers

Choosing the right tax preparer for your business is a... Read More

What the Tax Software Companies Dont Want You to Know

Haven't done your taxes yet? No problem. Now there is... Read More

Save Money on Taxes - Let Uncle Sam Pay for Your Fun!

"Deducting Meals and Entertainment"O.K. You've been working really hard on... Read More

Take Control of Your Taxes

As everyone in the U.S. knows, we have just passed... Read More

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

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

Complaince of Tax Return in Electronic Commerce Taxation

Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More

Tax Tips for Home-Based Business Owners

As tax time approaches, many home-based business owners begin completing... Read More

Getting A Second Extension to File 2004 Taxes

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

The Tax Man Cometh... To Search

You're at your office, or home, and the doorbell rings... Read More

What to Do If You Can?t Pay Your Taxes

The end of tax filing extensions is quickly approaching. What... Read More