Practice Alert

Estate Planning Alert - April 2004

In estate planning we are frequently faced with a scenario where the assets of a married couple are disproportionately owned. This presents a problem of having sufficient assets to fund a credit shelter trust if the spouse with the lower amount of assets dies first.

To solve this problem we frequently advise an inter-spousal transfer of assets or the purchase of a life insurance policy, on the spouse with the lesser assets, to ultimately fund the credit shelter trust.

The IRS recently issued Private Letter Ruling 200403094 that favorably rules on a technique that will give the “poorer” spouse sufficient assets to fund a credit shelter trust if he/she predeceases. This technique does not require the present transfer of assets to that spouse, nor the use of life insurance. The spouse with the predominant asset value creates a “revocable living trust” and a general power of appointment is given to the “poorer” spouse, which can only be utilized if that spouse predeceases.

If you have clients that can benefit from this technique please call Bob Katz for further information or explanation.