PLANNING MAKES A DIFFERENCE
Several years ago, I represented a widow in the management of her husband's estate. The husband, a successful professional, left an estate of around one million five hundred thousand dollars ($1,500,000). His will left the entire estate to his wife. There was no estate tax since spouses may give to each other unlimited amounts tax free.
Shortly thereafter, the wife died. This time, although the wife left everything to the children, Uncle Sam collected 37% of the estate over $600,000, or a hefty $330,000 - money which should have gone to her family. What a tragic loss!
The husband had consulted me before his death and I had shown him how he could leave one million two hundred thousand ($1,200,000) to his family TAX FREE. I suggested creating a Credit Sheltered Trust (also known as a Bypass Trust). Had he followed my advice, a $600,000 trust would have been created under his will, with the income of the trust to go to his wife for her life. On the death of his wife, this $600,000 would have gone to his children TAX FREE. The wife's estate would be entitled to an additional $600,000 exemption, thereby giving the family $1,200,000 free of all estate taxes.
Because the husband procrastinated in doing something in the planning of his estate, he effectively took $330,000 from his family.