If I Have More than the Federal Estate Tax Equivalent ($675,000 in 2000), is an A-B Trust Utopia ?
I am embarrassed to say that there have been many people who have spoken before groups of consumers (and some of these speakers were attorneys) who left the false impression that if you have an A-B Trust all of your problems were solved and you had reached “tax Utopia.” Unfortunately, there is no tax Utopia. For example, if a husband and wife have a net worth for Federal Estate Tax purposes of $2 million and we assume that 1) it is 1999, 2) the first spouse dies in 2000, 3) the second spouse dies seven years later 4) their estate appreciates at five percent per year and the first spouse to die leaves everything outright to the other (i.e. they do not have an A-B Trust), then upon the second death there would be a death tax of approx. $921,000. On the other hand, if they have an A-B Trust the death tax would be approx. $437,500. This is an improvement of approximately $485,000. That’s good. But I know of no one who would say that a tax bill of almost $500,000 is utopia. (See my page on
