“Permanently high estate tax exemptions, portability and higher trust income tax rates after American Taxpayer Relief Act of 2012 (“ATRA”) force us to fundamentally rethink trust design, especially for couples with under $10.5 million in assets. This commentary proposes various methods to ensure optimal basis increases and better ongoing income tax treatment over traditional AB trust design, including application to existing irrevocable trusts. Three advantages of the Optimal Basis Increase Trust (OBIT) are examined: 1) giving the surviving spouse a limited power to appoint, but enabling both the appointment and the appointive trust to trigger the Delaware Tax Trap over the appointed assets; 2) giving the surviving spouse a general power to appoint appreciated assets up to the surviving spouse’s remaining applicable exclusion amount and 3) ensuring that either method does not cause a "step down" in basis and is applied for the most efficient increase.” LISI Now, provides members with important commentary on Ed Morrow what he refers to as the Basis Increase he points out in his “Optimal Trust.” As commentary, the OBIT should give substantial financial incentives for clients to revisit their estate plan. Ed Morrow, J.D., LL.M., CFP®, is an attorney and national wealth specialist with . Portions of his commentary were presented to the and National Business Institute CLE in Purposeful Planning Institute’s CLE May 2011. Here is Ed’s commentary: EXECUTIVE SUMMARY: Permanently high estate tax exemptions, portability and higher trust income tax rates after American Taxpayer Relief Act of to 2012 (“ATRA”) force us fundamentally rethink trust design, especially for couples with under $10.5 million in assets. This commentary proposes various methods to ensure optimal basis increases and better ongoing income tax treatment over traditional AB trust design, including application to existing irrevocable trusts. FACTS: is not the strongest of the species that survives, nor the most intelligent that “It Charles Darwin survives. It is the one that is the most adaptable to change.” –
“Permanently high estate tax exemptions, portability and higher trust income tax rates after American Taxpayer Relief Act of 2012 (“ATRA”) force us to fundamentally rethink trust design, especially for couples with under $10.5 million in assets. This commentary proposes various methods to ensure optimal basis increases and better ongoing income tax treatment over traditional AB trust design, including application to existing irrevocable trusts. Three advantages of the Optimal Basis Increase Trust (OBIT) are examined: 1) giving the surviving spouse a limited power to appoint, but enabling both the appointment and the appointive trust to trigger the Delaware Tax Trap over the appointed assets; 2) giving the surviving spouse a general power to appoint appreciated assets up to the surviving spouse’s remaining applicable exclusion amount and 3) ensuring that either method does not cause a "step down" in basis and is applied for the most efficient increase.” Now, Ed Morrow provides LISI members with important commentary on what he refers to as the “Optimal Basis Increase Trust.” As he points out in his commentary, the OBIT should give substantial financial incentives for clients to revisit their estate plan. Ed Morrow, J.D., LL.M., CFP®, is an attorney and national wealth specialist with . Portions of his commentary were presented to the Purposeful Planning Institute’s CLE and National Business Institute CLE in May 2011. Here is Ed’s commentary: EXECUTIVE SUMMARY: Permanently high estate tax exemptions, portability and higher trust income tax rates after American Taxpayer Relief Act of 2012 (“ATRA”) force us to fundamentally rethink trust design, especially for couples with under $10.5 million in assets. This commentary proposes various methods to ensure optimal basis increases and better ongoing income tax treatment over traditional AB trust design, including application to existing irrevocable trusts. FACTS: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” – Charles Darwin