Guest commentary: Changes in estate laws mean it’s time to streamline your trust
By F.T. “Ted” Muegenburg
Less than 1% of estates are subject to estate tax – sometimes called “death tax” — under the current exemption limit of $13,990,00, but come January 1, 2026, the Estate, Gift Tax and Generation Skipping Tax Exemptions will bump up further to $15 million.
This means even more people will take a big sigh of relief that their heirs will not pay a death tax. The even better news is that with change, opportunity comes for all.
For many years, the exemptions were $1.5, $3.5, and $5 million. During this time, estate planning attorneys used planning devices designed to reduce a family’s estate tax hit. These devices have acronyms like “ILIT’s”, “CRUT’s”, “QTIP”, “GST”, ”GRAT’s”, “CLT’s”, but the centerpiece has long been an A-B-C Trust.
A-B-C Trusts are designed to produce the best outcome by reducing the estate tax at the client’s death for their surviving spouse, children, grandchildren, and other heirs.
However, they’re also infamous for being long and complicated — with jargon and opaque language that few clients can decipher.
With recent changes, however, we can now scrap those long, complex trust documents and replace them with a streamlined trust that fits the law today. A modern trust can now be concise, while still achieving the goal of making clear how and to whom you want your hard-earned estate to benefit. Following your death, the administration of this new trust will be simpler and incur fewer expenses.
Yes, you will have to consult your estate planning lawyer to revamp and modernize your trust. But if you don’t, your appointed trustee, surviving partner and family will be forced to comply with all the complexities of the old, dated trust. And the complexities, while useful at the time, no longer garner increased protective benefits. All they’ll do is increase trust administration expenses.
To take advantage of new rules allowing you to simplify, you will have to work with your estate planning attorney to terminate the old trust and create a new one. The expense can be well worth it, though, in saved time, confusion and administration expenses for your heirs upon your death.
If you leave your existing trust in place, you may not feel the pain.
Instead, you will be leaving that pain for your surviving partner, children, grandchildren and perhaps the communities you love and want to support. Most people do not want to be remembered for leaving heirs with a complicated, confusing mess. Right now is a great chance to polish your legacy and make your finishing statement elegant and clear.
Updating your planning now also allows you to take a fresh look at who you want to designate to handle your financial and personal care in the event you no longer can make these decisions. You may also adjust how your estate will be distributed to your beneficiaries.
Importantly, estate planning attorneys can also confirm and, if necessary, correct how you hold title to your assets to avoid the headache, delays, and expenses of a probate for assets not properly titled.
Lastly, it’s an opportunity to ensure that those people you have named as the beneficiaries of your IRA, 401K, life insurance and annuities and the heirs you trust to carry out your intent.
You may be wondering, though, what would happen if Congress reduces the Estate Tax Exemption in the future?
There’s no precedent of Congress ever reducing the exemption. We never say never, but experts agree that it is not likely.
There’s the axiom that two things in life are certain: death and taxes. Now, happily, at least one of the major taxes is gone for 99% of families. Death is still inevitable, though. Now is the time to update your planning so that at your death, the financial transition for your family is as smooth as possible.
I don’t believe that the best outcome can be measured in dollars or time saved for heirs, though. The best outcome is the peace of mind you enjoy right now knowing that you have done your best to benefit your surviving partner, family, and the communities you can about.
Ted Muegenburg is the chair of the Estate Planning Practice Group for Lowthorp Richards which is headquartered in Oxnard. Lowthorp Richards specializes in business, estate, family, agricultural, real estate, and injury law.
