Wednesday, May 18, 2011

Comparison of Portability and Exemption Trust

Last week, I prepared and gave a presentation to the Financial Planning Association of Nevada on some of the details of the 2010 Tax Act and its impact on estate planning. One interesting thing that I came across in preparing my presentation was a comparison of an estate relying on the new portability provisions versus utilizing an “A-B”, “Bypass”, or “Credit Shelter trust. “

The assumptions are as follows:

• Married Couple with a $10 Million estate
• Husband dies in 2011
• Wife dies in 2019
• 2% rate of inflation
• 5% return on assets

The original source of the chart and calculations may be found here on page 40-42.


This example shows the power of capturing the appreciation of the assets in the credit shelter trust. Of course, various factors could affect the calculations, including inflation rate, changes in the Capital Gains rate, and an assumption that the Estate Tax rate will remain at 35%.

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