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Trusts can minimize estate tax liabilities

Georgia residents who are thinking about the future may find that their estate plans are affected by the increased transfer tax exemption brought into existence by the 2017 Tax Cuts and Jobs Act. While the transfer tax exemption was doubled to $11.18 million per person or $22.36 million per married couple under the law, it has a built-in sunset clause in 2025. If additional legislation is not passed, the exemption will return to its 2017 levels -- roughly half the new exemption amounts. This means that people with substantial estates valued at over $5.6 million may wish to take action to preserve the larger exemption before its expiration in 2025.

Many people may be hesitant to adopt estate planning strategies that put a significant amount of their fortune out of their reach. However, the exemption from estate taxes includes both lifetime transfers and those made after death. By using certain trust strategies, people can maintain some level of control over their wealth while preserving the larger exemption. For example, a spousal lifetime access trust (SLAT) is an irrevocable trust that allows an estate owner to pass assets to a spouse, removing them from his or her estate. An independent trustee must be appointed, but the spouse can still access the assets of the trust when needed.

Since a SLAT is an irrevocable trust, some estate owners may be concerned about a threat to assets in case of divorce. Spouses who create trusts to benefit each other must be conscious of avoiding making identical trusts in violation of reciprocal trust doctrine.

While the 2017 tax reform legislation made significant changes to the transfer tax exemption, planning to minimize estate tax remains important. An estate planning attorney can work with a client to create a comprehensive plan that works to reduce the tax burden while providing the maximum benefit to loved ones.

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