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Time to revisit Florida trusts

Readers who followed a recent discussion about the impact of fiscal cliff legislation on the federal gift tax exemption may already be taking a second look at the continuing validity of certain types of their estate plans. West Palm Beach residents who employed credit shelter trusts or generation skipping trusts may want to consider consulting with a professional to assess whether those instruments will continue to serve their estate planning goals now that the portability of the federal gift tax exemption has been made permanent.

The portability feature allows a surviving spouse to claim the unused portion of a deceased spouse's lifetime gift tax exemption. That means that a surviving spouse could potentially gift as much as $10.5 million free from federal estate taxation. Before the portability provision became permanent, grantors frequently used credit shelter trusts as a means to achieve essentially the same end. With the new legislation in place, credit shelter may do nothing more than add an unnecessary task to the process of estate administration.

Experts also recommend having an experienced professional take another look at existing generation skipping trusts. Because those trusts are typically designed to take advantage of smaller gift tax exemptions, the original language of those trusts could lead to them now being funded at higher amounts than the grantor intended.

The new legislation makes it a good time to review the types of trusts that may be directly affected, and Floridians may want to consider using the opportunity to undertake a thorough review of their entire estate plans. Even if the new law makes credit shelter trusts obsolete, there are still a number of good reasons to establish and maintain trusts for a variety of important purposes. An experienced estate planning professional can make sure that all of a person's estate instruments work together to achieve individual estate planning goals.

Source: Palm Beach Daily News, "New tax laws may make trusts unnecessary," Gail Liberman, Feb. 1, 2013

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