Happy New Year!
Welcome to 2009 and the changes that take place for this tax year. The annual gift tax exclusion amount has increased to $13,000. Required minimum distributions from IRAs are not required this year - see my previous blog for details.
In 2001, the Economic Growth and Tax Relief Reconciliation Act was passed. On January 1, 2010, estate and generation skipping taxes are to be abolished. Both taxes are set to resume at their prior levels as of 2001 on January 1, 2011. Be very careful of the wording in your family trusts if they were drafted several years ago or if they contain a phrase that the credit shelter trust is to be funded in the full exemption amount. This means that in 2010, the entire amount of the trust could be left to the credit shelter trust and nothing to the survivor trust.
Credit shelter trusts are normally left to the children or grandchildren and the survivor trusts are for the surviving spouse. If you have a trust with a credit shelter trust or a marital deduction is set by a formula clause, this could disinherit the surviving spouse. You would want to have a maximum amount that can go to the credit shelter trust., and set a dollar amount or a percentage of the estate value. Seek advice from your estate planning attorney if you think your trust should be reviewed or amended. You will need to see your attorney to have the trust amended.