No. of Recommendations: 0
2gifts: "Actually, no, the primary reason is not that your daughter would be too young to handle the money. The primary reason for the trust (and it could be set up via the will or set up now) is that you want to protect both your wife's lifetime exemption as well as yours when passing the entire estate to your daughter. Assuming you will have a large enough estate to worry about estate taxes, when the first spouse dies, the entire estate will pass to the surviving spouse, but the lifetime exemption is then lost because there is no limit on the size of the estate that can be passed to a spouse without triggering estate taxes. However, when that spouse dies and everything goes to the daughter, only the lifetime exemption of that last spouse is used before estate taxes are due, so you have lost the first exemption.

So if you have a $10million estate, and you die, your wife inherits your half of it without estate taxes, but your $5 million exemption is not used. When she dies, your daughter then inherits that $10 million estate, but there is a $5 million exemption from your wife, and so your daughter owes taxes on the additional $5 million. If, however, you had left your half to a trust when you died, your #5 million exemption is used up. When your wife dies, her $5 million exemption is then used, and daughter has now inherited that $10 million without having to pay estate taxes because both exemptions were used."

Not a trust lawyer, but I do not think that this is necessarily the law anymore. I believe that the last tax law changed this issue (at least in part).

Regards, JAFO
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.