The top income tax rate for trusts is 39.4% for un-distributed income over $11,950. Add on another 3.8% medicare tax for un-distributed investment income and you are over 40%. In states like Florida where trustee fees and perhaps other expenses are paid half from income, you can see your that income dwindle. Beneficiaries, and trustees, of trusts should consider asset selection more carefully than ever before. Consider holding long term growth assets in trusts and keeping your bonds, REITS and high yielding stocks in your IRA or qualified retirement plan.

The new American Taxpayer Relief Act of 2012 was signed by President Obama on January 1st of this year and introduces a new transfer tax rate of 40% (gift tax, estate tax and generation-skipping transfer tax). It also permits a taxpayer to give away, during life, or at death, $ 5 million dollars which is indexed for inflation—$5,250,000 in 2013. If you have a spouse who predeceases you, who has not used the full $ 5 million, you may use your deceased spouse’s unused amount. For clients thinking of making small or sizeable gifts during life or at death, consult an experienced estate and trust attorney for your options.