The new tax law signed by President Obama prompted a sigh of relief from a lot of people because it increased the estate tax deduction to $5 million, instead of lowering it to $1 million as many feared, which is where it would have gone had Congress not acted before December 31. Now many people are predicting the end of testamentary trusts because there is no need to create a Family Trust to take advantage of marital deductions. Some are going so far as to say that testamentary trusts will disappear altogether.
This is probably a short-sighted view. While testamentary trusts may no longer be useful as estate TAX planning tools, they remain invaluable estate planning devices, especially where minor children or incapacitated individuals are involved. Where such individuals are among those to whom bequests would be left, use of a trust provides flexibility, professional management and peace of mind to the maker of the trust.
Don't assume that a trust has no place in your estate planning toolbox simply because the estate is under $5 million and no tax consequences will attach.
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