Simplifying Your Will


If you have Wills that provide for a number of testamentary trusts for spouse and children (and grandchildren), you may want to have them reviewed to see if there is any advantage to maintaining all of those separate trusts.

Prior to 2016, estate planners often recommended separate testamentary trusts in Wills to take advantage of the tax treatment of these trusts as separate taxpayers, which each had the advantage of separate graduated marginal tax rates. For estates with significant investment holdings, it could mean savings of $20,000 in income tax each year for each trust. That tax advantage was removed in 2016, so some Wills with multiple trusts are now more complicated to administer than they need to be, without the tax advantages.

Trusts can still be useful for other reasons, such as:

  1. protecting capital for children of a first marriage, while providing for the lifetime support of the second spouse;
  2. protecting persons with spending or lifestyle issues from have too large a lump sum of money at a time;
  3. protecting a child with a controlling or greedy spouse; or
  4. managing the finances of a beneficiary entitled to disability benefits so that the disability benefits will not be affected.

If the only reason for the trusts was income splitting, and the beneficiaries don’t want the trusts, the executor must take extra legal steps to wind up each trust while administering the estate, or if the trusts are not wound up, the executor must file separate tax returns for each trust.

You may want to review your will with your estate planning lawyer to see if it makes sense to simplify.