Page 33 - December 2018 | Cleveland Metropolitan Bar Journal

to keep in mind that that most of these states For unmarried couples, an A-B trust can situations requiring some creativity that are
have much lower threshold estate-tax exclusion help in planning for blended families, where where the estate planner really earns his or
amounts, and many have not incorporated the one or both partners have children from prior her money. In such cases, it’s always good to
federal portability concept for their estate taxes. As relationships. For example, Matt is a widower be able to rely on time-tested legal devices that
a result, the traditional A-B trust strategy remains with three children, who has lived with his can still help clients achieve their goals.
a valid solution for preserving the availability of partner Erica for fifteen years. Matt wants to be
the state tax exclusion. sure Erica is provided for if he dies first, but he
1 See generally Tax Cuts and Jobs Act, Pub. L. 115-97, 131 Stat.
also wants his children to have an inheritance 2054 (2017). Note that, while this change is set to expire after
Unmarried or Remarried Couples at her death. There are two ways to handle this: the 2025 tax year, the IRS has announced that it will not seek to
retroactively tax inheritances and gifts made under current law.
Of course, individual clients have different establish an “A” trust for Erica and a “B” trust See Internal Revenue Service, Estate and Gift Taxes; Difference In
priorities, and there are plenty of uses for the for the kids; or simply establish the bypass the Basic Exclusion Amount, 83 Fed. Reg 59,343 (Nov. 23, 2018).
A-B trust that have little to do with avoiding trust for Erica’s benefit, with the kids as the 2 See Tax Relief, Unemployment Insurance Reauthorization,
estate taxes. Perhaps the most common of remainder beneficiaries. This way, she can take and Job Creation Act of 2010, § 301(c), P.L. 111-312 (124 Stat.
3296). The change was then made permanent, effective in
these is protecting the first spouse’s wishes for all the income and distributions of the principal tax year 2013 and beyond, via the American Taxpayer Relief
their assets, should the surviving spouse re- but cannot change the remainder beneficiaries Act of 2012 (Pub. L. 112–240, H.R. 8, 126 Stat. 2313, enacted
January 2, 2013).
marry. By planning to place assets in an A-B (which could be a real concern, depending on
trust when the first spouse dies, a couple can how the relationships evolve over time).
predetermine how the surviving spouse will Rob Chaloupka is the owner the Law
benefit, in addition to controlling the assets for Conclusion Office of Robert S. Chaloupka, located
children and grandchildren. When a surviving In these days, when the estate tax seems on in Seven Hills, Ohio. His practice
spouse remarries, and estate documents are re- the decline, if not on the way out for good, the focuses on estate planning and probate,
drafted to provide financial assistance to the most common use for the traditional A-B trust as well as non-profit organizations.
new spouse, assets may be commingled. If this is not in high demand. However, while this Rob is a graduate of the Case Western Reserve
is done without careful consideration as to the may not be the most commonly used tool any University School of Law and is currently licensed
existing and new family structures, children more, it remains valuable for the estate planner in Ohio. He is also a member of the Equality Ohio
from the first marriage could be accidentally to keep in their toolbox. As with any other area Legal Network. Rob has been a CMBA member since
disinherited, or may not benefit in the way in of the law, it may be the common, run-of-the 2016. He can be reached at (216) 570-3154 or
which the first spouse may have intended. mill cases that pay the bills, but it’s the unique chaloupkalaw@gmail.com.

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