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Tom Meaglia, ChFC®, AEP®,
CLU®, CRPC®, MSFS
Chartered Financial Consultant
Investment Advisor Representative
Chartered Retirement Planning Counselor
CA Insurance Lic. #0567507
Meaglia Financial Consulting
2105 Foothill Blvd., #B140, La Verne, CA 91750
Toll Free: 800-386-3700
Bus: 909-593-6105
Cell: 818-681-8600
Fax: 909-593-6120
Email: tom@meagliafinancialconsulting.com
Website: www.meagliafinancialconsulting.com
July/August 2018
Protect that Exclusion
While Congress doubled the federal estate tax exemption with the passage of the Tax Cuts and Jobs Act of 2017, a couple who files taxes jointly can still lose a portion of the exclusion if they don’t create a strategy to maximize the full amount. A credit shelter trust, also known as a bypass trust or AB trust, is one such strategy.
The Background
Congress has long debated reducing federal estate taxes, with proponents of the change arguing that estate taxes affect owners of small businesses most, as their assets may be valued highly but are mostly illiquid. These firms with little cash, but with significant illiquid assets, would need to find the cash to pay estate taxes elsewhere or liquidate their firms. This is a painful reality for some family businesses.Taxes Still Matter
Ultimately, the federal estate tax exemption was doubled to $11.18 million per individual and $22.36 million per couple, indexed to inflation. (This provision expires in 2025.) But one thing that hasn’t changed is the potential for couples to lose half of their estate tax exemption should one of them die. That’s where a credit shelter trust can come into play.How It Works
A credit shelter trust protects the full exemptions of both spouses. You would work with a professional to create the trust and include the trust’s terms in your will. It’s revocable until the death of one spouse, whose estate assets are transferred to the trust and therefore don’t inflate the surviving spouse’s estate, which could place them over the individual exemption limit. Then the trust becomes irrevocable.The trust typically allows the surviving spouse to access the trust’s income and even principal. When the surviving spouse dies, the heirs become the beneficiaries of the trust. Talk to an estate planning attorney to learn more.
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Investment advisory services are offered through Fusion Capital Management, an SEC Registered Investment Advisor. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration is not an endorsement of the firm by the commission and does not mean that the advisor has attained a specific level of skill or ability. All investment strategies have the potential for profit or loss.
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