Your AB Trust Under the New Estate Tax Law

If you have a revocable living trust that was executed many years ago, now is a good time to have your estate plan reviewed to ensure that it will conform to the new estate tax law.

AB Trust

Prior to the new estate tax law, it was necessary to use an AB trust to get the full benefit of both estate tax exclusions for a married couple. Under the new law there’s a portability feature that essentially does the same thing. So if you have an AB trust that was executed many years ago, now might be a good time to have it reviewed.

Here’s why.

Under the new estate tax law, the estate tax exemption is $5 million per person and $10 million per couple. Based on the size of your estate, there may not be any estate tax. If there isn’t going to be an estate tax, you’re current plan might do more harm than good (with a loss of step up in basis and potential income taxes) if you must place assets in the B Trust, especially if there will not be any estate tax benefit.

Ancillary Documents

Same goes for your ancillary documents. While the new estate tax law pertains primarily to the estate tax, the exclusion amount, and estate tax rates, your ancillary documents might need updated simply because they were executed so long ago. The ancillary documents include powers of attorney for assets and healthcare and living will. Different states have different laws pertaining to powers of attorney so it’s a good idea to talk to your estate planner at least every five years or so to see if you should execute new documents.

If your estate is less than the estate tax exemption and if you have an AB trust that was executed many years ago, it’s a good idea to have your trust reviewed to ensure that your estate plan will conform to the new estate tax law.