Ask the Expert: Lawyer's advice on trust
My revocable living trust was drawn up in 2001. My lawyer recently advised me to go for a new trust, as some laws have changed. There's no change in my family situation. A new living trust would cost $4,000. Do I need one?
Not necessarily. There's been a substantial increase in the federal estate tax exemption since 2001, but whether that affects you depends partly on the size of your estate and the wording of your 2001 revocable trust, says Eric Kramer, a Uniondale estate attorney.
Your taxable estate includes everything in your revocable trust. But there's no estate tax on anything you leave to your spouse, and you can currently leave up to $5.12 million free of federal tax, and up to $1 million free of New York estate tax to anyone else, say to your kids or to a trust. Of course, these exemption amounts can change. One solution for a couple is to leave everything to each other, with instructions that any amount the surviving spouse "disclaims" must go into a new trust. If your 2001 revocable trust includes such instructions, you probably don't need a new one, says Gregg Weiss, a New York City estate lawyer, because the surviving spouse can decide how much to disclaim based on prevailing tax law.
For example, let's say you left $2 million to your wife. If she leaves that $2 million to your kids, under current law, $1 million is subject to New York tax. But if she disclaims $1 million to a trust that will pay her income for life and then pay its principal to the kids, they can inherit the entire $2 million -- $1 million from her and $1 million from the trust -- estate-tax free.
The bottom line Ask your lawyer to be more specific about the reasons for his recommendation.
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