Estate Planning Acronyms for the Remainder of 2012

By James F. McDonough, Jr. on September 24, 2012

As we approach the fiscal cliff and the outcome of the presidential and congressional elections are not clear, individuals are worried about the loss of the $5,120,000 exclusion (the “Exclusion”) at the end of the year. In 2013, the Exclusion drops to $1,000,000 and there is no legislative solution at the moment. Unfortunately, one cannot speak “tax” unless one speaks in acronyms. Therefore, this guide may be useful.

“SAT” means Spousal Access Trust which is a trust that is designed to transfer property out of your estate for death taxes but have access to the funds for support. Typically, two SATs are formed and the creator of the trust names the other person as the beneficiary. The trusts cannot be identical, but can be designed to provide substantial benefits to each beneficiary. This technique hedges against the loss of the exclusion without losing access to all of your money. A gift to a spouse remains in the estate of the recipient-spouse because of the marital deduction and is subject to estate tax at death.