11 REASONS TO FUND A FAMILY OR CREDIT SHELTER TRUST RATHER THAN ELECT PORTABILITY AMONG SPOUSES
Provided By Law Offices of Karen Brady, P.C., Originated by Philip J. Kavesh, J.D.
1. Certainty if law changes: A hedge against the "coupon" later falling or portability not being extended beyond 2012;
2. Appreciation in value between 1 st and 2 nd death not estate taxable (Coupon is not indexed for inflation);
3. Utilize first spouse to die's GSTT exemption (not portable);
4. Asset protection benefits for surviving spouse (e.g. lawsuits);
5. Protection of surviving spouse if remarriage (divorce, spousal election at death);
6. Preserve intended distribution of first spouse to die's assets;
7. Possibly make it easier for surviving spouse to qualify for government needs-based benefits;
8. Maximize use of exemption if surviving spouse remarries (Coupon from first spouse could be cutoff when second spouse dies; funding Family Trust may allow surviving spouse to also use second spouse's Coupon);
9. Cutoff statute of limitations for audit for first spouse to die's 706 (Using portability may extend statute beyond survivor's death);
10. Don't have to rely on executor making timely portability election on estate tax return (especially in small and moderate sized estates where tax return not otherwise required);
11. In states with decoupled estate tax, may need Family Trust to utilize exemption.
* The terms Family Trust, Bypass Trust and Creditor Shelter Trust are often interchangeable. In our practice, we often call it the "Coupon Trust".