Obama Budget Proposal Involving Trusts and Estate Tax

One of Obama’s 2013 budget proposals would require grantors to include trust assets in their estates for estate tax purposes. This would force many people to pay estate tax on trusts they created to avoid estate tax.

Currently, the law does not collect income tax for a transfer between a grantor and a trust. With his new proposal, Obama is essentially attempting to merge income tax rules and estate tax rules–which have long been separate.

Ron Aucutt, one estate attorney in Virginia, thinks that people should refrain from getting too worked up about the proposal. He says that this is probably just a placeholder for a future proposal that will be more specific.

See Diane Freda, Obama Estate Tax Budget Proposal Keeps Wealthy Jumpy, Bloomberg, June 12, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.