A marital deduction trust is a very important estate planning tool which you may wish to consider if you are concerned that you will be taxed on a substantial estate. You have worked hard for your money and property over the course of your life, and you need to understand the legal tools that are available to you to provide protection for your assets both during your life and after your death. A marital deduction trust is one of those tools.
If you want to learn more about marital deduction trusts, alternative trust options which serve similar purposes, or other legal tools that you can use to protect your assets, your best option is to speak with an experienced White River Junction estate planning lawyer.
Unsworth LaPlante, PLLC has extensive experience with marital deduction trusts and with all other estate planning tools available under Vermont law. We can help you to ensure you are able to leave the maximum amount of your money to spouses and other beneficiaries without losing a portion of your property to taxes. Give us a call as soon as possible so we can begin the process of creating your comprehensive estate plan.
What is a Marital Deduction Trust?
Section 2056 of the Internal Revenue Code sets forth the rules for a special type of trust called a marital deduction trust.
A marital deduction trust makes it possible to put property into a trust and to name your spouse as the trust beneficiary. When you pass away, your spouse has the authority to make use of all of the property and assets which are owned by the marital deduction trust.
Marital deduction trusts are used for the purposes of avoiding estate taxes or delaying the payment of estate taxes. Estate taxes normally must be paid in situations where the value of an estate exceeds an excludable amount (which is set at $5.45 million as of 2016). However, when money is put into a marital deduction trust, it doesn’t matter how valuable the property is or whether it exceeds the amount of the federal estate tax exemption. The spouse who is named as the beneficiary of the trust will not owe any federal estate taxes after death.
In many cases, a marital deduction trust makes it possible for both spouses’ assets and estates to be shielded from federal estate taxes. This is because the assets in the trust will pass free and clear to the surviving spouse when the first spouse dies. When the surviving spouse dies, assets which were owned in the trust aren’t included in his or her estate. This means if other assets outside of the trust don’t exceed $5.45 million, then no estate tax has to be paid. If other assets exceed $5.45 million, the estate tax owed is still less than it would be if he or she had also owned the trust assets.
When a marital deduction trust is created, the spouse who is the beneficiary of the trust and who continues to use the property after his or her husband or wife’s death will be able to transfer the property and assets in the trust to beneficiaries that he or she determines. At that time, estate taxes may need to be paid.
A marital deduction trust is a good solution if you do not mind if your spouse is given the opportunity to determine who will inherit the trust property after death. However, there are also other alternatives including a qualified terminable interest property (QTIP) trust. A QTIP trust works very similarly to a marital deduction trust but there is a very important difference. The trust creator who creates and funds the QTIP trust is able to determine who will receive any property remaining in the trust after the death of the spouse.
How Can a White River Junction Estate Planning Lawyer Help?
If you are interested in creating a marital deduction trust, a QTIP trust, or any other type of trust aimed at reducing or avoiding estate taxes, you should consult with a White River Junction estate planning lawyer to learn about your options and to make sure you use the right asset protection tools. Unsworth LaPlante, PLLC is here to help.
To learn more about estate tax avoidance and about how trusts can be used as part of your estate plan, join us for a free seminar. You can also get personalized advice tailored to your situation if you give us a call at (802) 879-7133 or contact us online. Reach out to us today so we can get started on helping you to avoid estate taxes and protect your legacy.