Lally Law Blog

Recent changes in the law might make you want to review your revocable living trust to see if it still does what you want it to. Cautious estate lawyers in recent years have been writing Trusts to maximize the Federal gift, and generation-skipping transfer tax exemptions, for larger estates. One of the methods used to maximize the exemption utilizes a Marital Exemption Trust or an "A/B" Trust. Even when the exemption was $11 million or more per spouse, some cautious Trust drafters used these techniques because these exemptions were set to sunset this year.

Many of the Trusts that were written this way become IRREVOCABLE, and are NOT MODIFIABLE after the death of the first spouse. In other words, once a spouse dies, the surviving spouse is unable to revoke or change their trust. For the most part, they are stuck with it.

I have even seen these Marital Exemption Trusts being written for couples whose estates are far less than the applicable exemptions and who have no need to maximize the exemption.

Under the "One Big Beautiful Act" (OBBBA) recently enacted into law, the exemption was raised to $15 million dollars, or $30 million dollars per couple. The Act makes this exemption permanent. The Act builds in future adjustments for inflation.

Additionally, the OBBBA preserves the "Portability" provision of the prior act, meaning that the surviving spouse can elect to use the unused portion of the deceased spouse's exemption. Therefore, a lot of what these trusts were meant to do (to maximize the use of both spouses' exemption) is accomplished by simpler means. (Note "portability" doesn't happen automatically. You have to elect it on their Estate Tax Return-- which must be timely filed even if no tax is due).

So you might have ended up with a Trust that will become IRREVOCABLE and NOT MODIFIABLE after the death of your spouse. This might be too restrictive to the surviving spouse who might need or want to make changes to the Trust to meet their needs. (There may be reasons why a couple would want the Trust to be Irrevocable after the death on one of the parties, but for estates of $15 million - $30 million for couples- Tax Exemption planning is not one of them). If you want to maximize your flexibility and ability to change, re-order or terminate your trust you should probably review the trust.

You can give me a call and make an appointment to review your Revocable Living Trust and your other documents to see if they still do what you want them to do. I charge $250.00 for the review, and if any modifications need to be done, I will credit this payment toward that fee.

Call me at 502-896-4529.
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