Situation: A widow had a very large IRA and significant ongoing expenses. Her expenses were large enough that she needed more than just the required minimum distributions to meet her annual cash flow needs. When her husband passed away several years prior, a bypass trust was created to shelter some of his assets from estate taxes.

Opportunity: Burt Wealth Advisors has an expertise in estate planning, including estate tax laws, and can determine the optimal way to structure estates.

Solution: Burt Wealth Advisors knew that this widow would benefit from a change in the estate tax laws, which increased the size of the unified credit. Since the current assets (including the bypass trust) did not exceed the exemption amount under the new rules, we approached the widow’s attorney and CPA proposing that some of the bypass trust assets be used for the widow’s current cash needs. This idea allowed the widow to reduce her required minimum distributions and thus significantly reduced her taxes each year and allowed more of the IRA assets to continue to grow tax-deferred well into the future. In addition, since the cost basis of the assets distributed from the trust was high relative to the value, there were minimal taxes as a result of the distribution. Finally, assuming the trust was fully distributed over the following several years, the widow would save money by not having to pay trustee fees and accounting fees on the trust.