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By: Matthew T. McClintock, J.D., Vice President, Education, The WealthCounsel Companies

The uncertainty of the pre-ATRA transfer tax system motivated many clients with higher net worth to implement sophisticated, multi-layered estate planning strategies. Driven by a desire to remove the value of appreciated (or appreciat-ing) assets out of their gross estates, many strategies incorporated different types of irrevocable trusts (IRT) that were designed to be completed gifts for gift and estate tax purposes.

With ATRA came the combination of permanent, $5 million inflation-indexing estate tax exemptions and DSUE Amount portability for surviving spouses, obviating estate tax-driven strategies for all but a miniscule percentage of the U.S. population. But higher marginal income tax rates, a higher capital gains tax rate, and the collection of surtaxes that washed in the Affordable Care Act has put income tax-driven strategies closer to the top of the list for most clients. Moreover, while the pain of transfer tax was on a distant horizon, the pain of income tax is acute and immediate as clients see that their income doesn’t stretch as far as it used to.

These and other changes in circumstances are forcing many clients to consider modifying their IRTs. This article examines the various methods to do so.

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