Dear Bogleheads,
Allow me to first express my gratitude for the wealth of knowledge I've gained from this forum and its predecessor since 2004. The Bogleheads' investing philosophy has had a profoundly positive impact on my life, and I sincerely thank you all for your generosity in sharing your insights.
I am now 70 years old, married for over 37 years, and have two adult children. My wife and I have a net worth near the current federal estate tax exemption limit, and I'm seeking advice on minimizing estate and income taxes. We live in California (a community property state with no state estate tax).
Tentatively, we plan to establish an AB Trust. Upon the first death, assets up to the federal estate tax exemption would transfer to a bypass trust, and the remainder to a survivor trust using the unlimited marital deduction. We would also port any DSUE to the surviving spouse.
My understanding is that all assets, NOT just half, will receive a step-up in basis upon the first death, allowing us to restructure assets without incurring capital gains tax. This is crucial, as we'd like to sell a rental property and invest the proceeds in index funds upon the first death.
To minimize income tax on the bypass trust, we intend to distribute all income and capital gains from the bypass trust to our children. I understand that if stipulated in the trust document, capital gains can be treated as income for trust accounting purposes, overriding the Uniform Principal and Income Act.
I would greatly appreciate any feedback on the feasibility of this plan. I'm concerned that I may have misinterpreted some IRS rules, as estate planning is far more complex than investing.
Thank you in advance.
Allow me to first express my gratitude for the wealth of knowledge I've gained from this forum and its predecessor since 2004. The Bogleheads' investing philosophy has had a profoundly positive impact on my life, and I sincerely thank you all for your generosity in sharing your insights.
I am now 70 years old, married for over 37 years, and have two adult children. My wife and I have a net worth near the current federal estate tax exemption limit, and I'm seeking advice on minimizing estate and income taxes. We live in California (a community property state with no state estate tax).
Tentatively, we plan to establish an AB Trust. Upon the first death, assets up to the federal estate tax exemption would transfer to a bypass trust, and the remainder to a survivor trust using the unlimited marital deduction. We would also port any DSUE to the surviving spouse.
My understanding is that all assets, NOT just half, will receive a step-up in basis upon the first death, allowing us to restructure assets without incurring capital gains tax. This is crucial, as we'd like to sell a rental property and invest the proceeds in index funds upon the first death.
To minimize income tax on the bypass trust, we intend to distribute all income and capital gains from the bypass trust to our children. I understand that if stipulated in the trust document, capital gains can be treated as income for trust accounting purposes, overriding the Uniform Principal and Income Act.
I would greatly appreciate any feedback on the feasibility of this plan. I'm concerned that I may have misinterpreted some IRS rules, as estate planning is far more complex than investing.
Thank you in advance.
Statistics: Posted by Finite Field — Wed Jan 22, 2025 3:41 pm — Replies 3 — Views 174