Dealing with Obamacare’s Huge 3.8% Surtax on Trust Income

With the Supreme Court upholding Obamacare, trust lawyers must now deal with the huge potential impact of the 3.8% surtax on trust income (over the threshold of approximately $12,000).  Certain types of income are excluded but this is a big potential hit and will probably lead to more use of life insurance as a way to deal with it, and now there is even more reason to draft your irrevocable trusts as intentionally defective grantor trusts (IDGT’s).  Individuals planning on leaving large estates should contact an estate planning attorney right away about avoiding or minimizing this tax, and any trustees currently handling a large trust estate with significant income needs to get in touch with a knowledgeable CPA ASAP.

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