Palmer Rodak & Associates
Palmer Rodak & Associates
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Portability, new tax code and estate plan updates

As California is one of the states in the nation with a state income tax, residents logically want to understand how the new Tax Cuts and Jobs Act may impact their bottom lines. When reviewing their situations to determine this, it is wise to also evaluate one's estate plan. 

As explained by MarketWatch, currently when one spouse dies, the surviving spouse is able to inherit assets without incurring any tax on the value of those assets. This is often referred to as portability and a person's estate plan must clearly reference this in order for it to be effective. Under the new tax law that goes into effect next year, this will remain intact.

However, Accounting Today cautions married couples from blindly setting up their estate plans to invoke portability. The benefits associated with this may or may not be in the best interest of every couple or family. There are many situations when a bypass trust or a qualified terminable interest property trust, or a QTIP, may make more sense. One example of when these trusts may offer better protection is when the surviving spouse has creditors who may want to access the assets. Portability would not protect this from happening but a trust may.

Families in which one or both spouses were remarried and had children from their prior marriages may also be wise to set up special trusts rather than relying on portability. This allows each spouse to ensure assets will flow directly to their children first.

 

 

 

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Palmer Rodak & Associates
Certified Family Law Specialists State Bar of California Board of Legal Specialization

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