In the past attorneys used to assist clients with setting up complex Trusts in order to help protect assets from Federal estate taxes. Today the problem is the impact that capital gains taxes will have on these Trusts. Lawyers are currently encourage clients to revise older Trusts so that the beneficiaries can be protected from a capital-gains tax hit. For years married couples have set up credit shelter trusts (also known as irrevocable bypass trusts), to allow for more assets to be passed onto their children tax-free. The problem is that assets in a bypass trust do not get a capital-gains tax break, heirs do not get to enjoy a “stepped up” basis. Estate planners are currently assisting clients with moving assets into the estate so that the beneficiaries can enjoy tax savings from the stepped up basis.
See Susan B. Garland, Old Trusts Create Tax Issues for Heirs, Kiplinger Today, October 20, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
