It is rare when I feel that Court action is necessary for estate planning objectives, but this is one instance when I do.
Do you recall when the federal estate tax exemption was $600,000 per person? Subsequently, it was raised to $750,000 per person. We were doing a lot of A-B Trusts and dividing real properties between Trust A and Trust B on the death of the first spouse.
As a result over the years, appreciating property, which was assigned to Trust B, was not getting a step-up in basis on the death of the surviving spouse. Why? Because such property was assigned to the estate of the first deceased spouse and not included in the estate of the surviving spouse. This is required to obtain a step-up in basis to wipe-out capital gain on an asset.
We, recently filed Petitions with the Court to revoke Trust B as of the date Trust B was funded and to transfer Trust B assets to Trust A. Since they were then be included in the surviving spouse’s estate, those assets would obtain a step-up to negate capital gains tax on them when sold by the children beneficiaries. In those two cases, the real property had appreciated in value since the 1990s, $200,000 to $500,000 in value creating a lot of capital gain. The Court graciously granted our Petitions saving our clients’ children many thousands of dollars of capital gains tax.
Do you know anyone with an A-B Trust whose spouse died at least 10 years ago? If so, it might be worth a consultation to consider revoking Trust B in a traditional (Non-Blended) family to negate thousands of dollars in capital gains tax on appreciated assets (Real property, Stocks, etc.).