The top estate planners in the country warn IRA and retirement plan owners to develop an appropriate response to the new estate tax laws just passed this December. We are now in a completely different tax environment ripe for the cruelest trap of all: where the standard language of traditional wills and trusts forces too much money (now up to $5,000,000) into a trust limiting the surviving spouse to income and the right to invade principal for health, maintenance and support. If the trust is overfunded, which is likely under the new law, less discretionary income is available for the surviving spouse. Furthermore, if this common trust is the beneficiary of an IRA or retirement plan, massive income taxes are also triggered – all this can be avoided with appropriate language in wills and trusts and appropriate beneficiary designations of IRAs, Roth IRAs and retirement plans.
Under the new estate tax laws, older traditional estate plans are not helpful, but harmful, because of the severe restrictions they place on the surviving spouse, something most couples do not want. Many IRA and retirement plan owners have this detrimental language in their existing wills and trusts and don’t even know it. IRA and retirement plan owners with assets between $600,000 and $5,000,000 are particularly vulnerable. Both spouses have likely become quite accustomed to making expenditure decisions based on desire in addition to need. To lose that control would be devastating. Without a review of their older traditional estate plan they could be thinking they have left everything under the control of their spouse, but in reality, they have not.
I encourage you to have your will reviewed and updated to comply with the estate planning law. In Pittsburgh? Please join us for one of our FREE workshops entitled, “How to Avoid the Cruelest Trap of All: Don’t Unknowingly Restrict Your Surviving Spouse’s Independence or Access to the Family Money After the Tax Relief Act of 2010.” See our location and times on www.paytaxeslater.com. Not in Pittsburgh, you can purchase this workshop to view in the comfort of your own home for just $97 – to order call our office at 412.521.2732.