13:10
actually do they even have skills sections for 1L/2L resumes
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Simple English definitions for legal terms
exemption trust
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A quick definition of exemption trust:
An exemption trust is a way for wealthy married couples to reduce the amount of estate taxes they have to pay when they pass away. When one spouse dies, their portion of the couple's property is put into a trust that will pass to their children or other beneficiaries. The surviving spouse can still receive income from the trust, but they can't overly benefit from it. The surviving spouse's portion of the property is put into another trust or left to their estate. When the surviving spouse dies, the exemption trust passes to its beneficiaries, and the assets of the surviving spouse will avoid estate taxes up to their own exemption amount. This method may save on estate taxes, but it can be expensive and complicated, and it may not be beneficial for everyone.
A more thorough explanation:
An exemption trust is a legal tool used by wealthy married individuals to maximize their estate tax exemptions. It involves creating a trust or two separate trusts after one spouse passes away. The deceased spouse's portion of the couple's property, up to the applicable exclusion amount, is put into a trust (the exemption trust). This trust is irrevocable and will pass to beneficiaries other than the surviving spouse, usually their children. The surviving spouse must follow the trust's plan without overly benefiting from its operation, but this trust often passes income to the surviving spouse to live on for the rest of their life.
For example, if a couple has $20 million in assets and one spouse passes away, $12.06 million of the assets would be put into the exemption trust, and the remaining $7.94 million would be put into another trust or left to the estate of the surviving spouse. When the surviving spouse passes, the exemption trust passes to its beneficiaries, and the assets of the surviving spouse, whether or not in a trust, will avoid estate taxes up to their own exemption amount.
This method of dividing assets may save on estate taxes, but only in limited circumstances. Before the Tax Cuts and Jobs Act, many individuals used this to take full advantage of their estate tax exclusions which were less than $6 million. After the Tax Cuts and Jobs Act, this tool can only be beneficial in limited circumstances because the exclusion now is over $11 million which applies to few individuals. However, many states have no gift taxes or have estate taxes which are not portable, which might make exemption trusts still beneficial to wealthy couples.
It is important to seek advice from estate experts when using exemption trusts. The Internal Revenue Service (IRS) requires specific wording in the creation of these trusts and limits on the surviving spouse's use of the exemption trust. Also, given the high fees involved in planning, managing, and paying for attorney fees for exemption trusts, often an exemption trust may be more costly than the estate tax itself, and sometimes, the estate would incur less taxes outside of the exemption trust by incurring a stepped-up tax basis for property.