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DEAR TRUST OFFICER:
Now that the federal estate tax exemption is $15 million, and the change is permanent, do I still need a marital deduction trust in my will for my wife? —CONCERNED HUSBAND
DEAR CONCERNED:
Most likely, yes. If your current will includes a trust for a surviving spouse, you probably will want to keep it. A trust for a surviving spouse provides important asset management benefits that can be vitally important to a person who is entering widowhood, especially in the later retirement years. For most affluent families, a marital trust is the way to go.
Blended families are a special case, for which provision may be made for a spouse and children from an earlier marriage. The tool is called the Qualified Terminable Interest Property Trust, or QTIP trust. Even if the marital deduction allowed for the QTIP trust is not needed, securing the inheritance for all beneficiaries may be an important enough consideration to employ the trust in wealth management.
If you live in one of the states that still imposes an estate or inheritance tax, you may want a marital deduction trust even if the estate isn’t large enough to incur a federal estate tax.
If you are married and don’t yet have a will, make an appointment to see an estate planning attorney soon. Your spouse will thank you for it.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
A tax preparer in Miami received a notice from the IRS regarding one of his clients. According to the notice, the IRS could not direct deposit a refund because the financial institution said the bank account number was invalid, or the bank account could not be otherwise validated. The notice asked for a new or updated bank account number.
That sounded very fishy to the tax preparer, especially when several other clients reported getting the same letter. In all his years of practice, this tax preparer had never seen a notice like this. He told his clients to do nothing until he investigated further.
As it turned out, this one really was from the IRS.
The notice suggested updating direct deposit information by visiting IRS.gov/Account, which is a legitimate IRS web address. According to an IRS spokesman, any notice or letter from the IRS will be available on the taxpayer’s online account.
To learn more about tax scams and frauds, the IRS has prepared a list of warning signs to watch for at www.irs.gov/help/tax-scams/recognize-tax-scams-and-fraud. Promises of a big payday, threats demanding immediate payment, and website links that don’t go to IRS.gov are all tipoffs.
When it comes to taxes and finances, one cannot be too careful.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
Modern families raise novel issues of law, as shown in this recent case from the Georgia Court of Appeals.
Two women, Tiffany and Jennifer, were lawfully married in 2018. To have a child, they authorized and consented to artificial insemination for Jennifer. The baby was born in 2021, and both women were listed as parents on the child’s birth certificate.
Unfortunately, the marriage did not last, and Tiffany filed for divorce in 2024. In court, Jennifer claimed full custody of the child, saying that Tiffany was not the biological mother and had never adopted the child as a step-parent. Tiffany countered that under Georgia law any child born in wedlock is presumed the legitimate offspring of both spouses, so she didn’t need to go through an adoption procedure to become the child’s legal parent.
The trial court rejected Tiffany’s argument on the theory that the relevant law was enacted in 1964, and the legislature could not have contemplated that it would apply to a same-sex married couple. The Court of Appeals reversed, saying that the intention of the legislature is not relevant when the words used in the statute are clear and unambiguous. The statute is gender neutral, referring to “spouses” (not “husband and wife”) and as such plainly encompasses same sex marriages regardless of the legislature’s expectations.
What’s more, when the United States Supreme Court held that same sex couples had the constitutional right to marry, all of the benefits that attach to marriage flowed in as well. The aspects of marital status include: taxation, inheritance and property rights, rules of intestate succession, spousal privilege in the law of evidence, hospital access, the rights and benefits of survivors, and child custody, among others.
The case was sent back to the trial court with Tiffany’s arguments vindicated.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
One of the objectives of a typical trust-based financial plan is to separate the benefits of property ownership into current and future portions. In a marital deduction trust, to take a routine example, a surviving spouse must have the right to all the trust income, paid at least annually, and in the future, after that spouse’s death, the remainder beneficiaries (typically, the children or grandchildren) will receive what is left in the trust.
Measuring “income”
But that phrase “all the trust income” can be a source of surprising contention. Traditionally, trust income consists of dividends and interest. Capital gains and losses affect the amount of principal and, therefore, accrue to the beneficiaries. So, should the trustee invest for maximum growth, for maximum income or for some of each? When financial markets are volatile, finding the right balance may be tricky. If you add to the mix an extended period of relatively low interest rates, it becomes even harder to deliver an income consistent with beneficiary expectations out of a portfolio.
New trust forms have emerged that try to reduce the potential for conflict between income and remainder beneficiaries over a trust’s investment policy. Called a total return trust or a private unitrust, this approach calls for paying the income beneficiary a fixed percentage of the trust’s value, determined annually. If stock prices move higher, the income beneficiary shares in that good fortune.
This approach frees the trustee to invest trust assets for total return, a direction that trustees have been encouraged to take by changes around the country in state laws governing fiduciary investing. IRS regulations recognize this approach as well.
The question of flexibility
There isn’t as much flexibility in setting the payout rate for a total return trust as one might surmise. Set the rate too low and the income beneficiary won’t have enough to live on. Set it too high, and there is a real risk that the trust will be depleted, leaving nothing for the remaindermen. That’s why some estate planners are uncomfortable with the inflexibility of the total return format. Volatile financial markets can have unwanted effects on fixed formulas. For that reason,several alternative approaches also have been developed for balancing the needs and meeting the expectations of beneficiaries from multiple generations.
The table below briefly summarizes some of the approaches that may satisfactorilybalance the interests of current and future beneficiaries. We would be glad to discuss your options for designing a family trust. Please contact us at any time.
What does a trust beneficiary receive?
|
Trust approach |
Definition of income |
|
Traditional trust |
Interest and dividends |
|
Total return trust |
Fixed percentage of assets, determined annually |
|
Indexed payout trust |
Fixed dollar amount, adjusted for inflation each year |
|
No-drop unitrust |
Fixed percentage of trust assets, with a floor to protect income beneficiaries |
|
Capped unitrust |
Fixed percentage of trust assets, with a ceiling to protect remainder beneficiaries |
|
Fully discretionary trust |
Trustee decides annually what is best for beneficiaries, taking into account their circumstances and financial market conditions |
Source: M.A. Co.
Article ©2026 M.A. Co. All rights reserved. Used with permission.
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