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Monday, April 4, 2016

No More ABC Trusts

 

    For years the standard in the Estate Planning industry was the ABC Trust so there is a good chance you have one.   You will know you do if you have a Trust that requires mandatory divisions into separate irrevocable Trusts when the first spouse dies.  If you do please have it reviewed immediately.

    Why?  Because unless you and your spouse have more than about $15 million you do NOT need this.  Even worse, I see Trusts everyday that have ABC provisions and owners have less than $500,000 - meaning they never even needed such a Trust and were simply "oversold" by their attorney. 

    ABC Trusts are tedious and EXPENSIVE to administer following the death of the first spouse and are simply are not necessary.  Some attorneys justify their persistent use of ABC Trusts as a way to protect a surviving spouse in the event they end up remarried to some "grifter" or as having some sort of Asset Protection benefit.  

    But I can assure you that in my 19 years of Estate Planning, I have never seen a situation where an Irrevocable Trust prevented anyone from stealing from a surviving spouse or provided any form of effective asset protection.

    On the other hand, on a daily basis I deal with surviving spouses whose hands are tied by having to deal with these Irrevocable Trusts in situations such as trying to get a Reverse Mortgage or line of credit, or trying to eliminate a child beneficiary who has a drug or gambling problem.

    When I started doing this and the Estate Tax Exemption was $600,000 these Irrevocable Trusts had a lot of benefits.  But it has been a long time since the average family was anywhere near the Estate Tax Exemption levels and it is time to search out these outdated Trusts and fix them.




The Tonkovich Law Firm assists clients with Estate Planning, Wills, Trusts, Durable Powers of Attorney, Conservatorship and Contested Probate Procedures and Business and Real Estate Litigation in Irvine, CA as well as El Toro, Aliso Viejo, Lake Forest, Laguna Hills, Tustin, Newport Beach, Santa Ana, Newport Coast, Ladera Ranch, Foothill Ranch, Mission Viejo, Laguna Woods, Corona Del Mar, Silverado, Orange, Laguna Beach, Rancho Santa Margarita amd Fountain Valley in Orange County.



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