In our final installemnt of our Estate Planning Minefields series, we're looking at over-complicated estate plans. The current federal estate and gift tax amount is $5.43 million in 2015 (up from only $600,000 in 1997). Because of that change, only 0.14 % of estates owed estate tax in 2014.
When the estate tax limits were lower, many couples created complex estate plans with a bypass trust, so that they could lower their estate tax. These couples may no longer need such elaborate plans. In addition, they may not like the fact that a trust hits the highest income tax bracket after it has only $12,150 of income (by comparison, an individual doesn't hit that highest bracket until his taxable income is more than $406,750).
So, you may not need a complex trust to accomplish your estate planning goals. If you have already set up a complex trust, you may be able to amend it to simplify its provisions for your family.