‘Trust Tsunami’
McDowell’s sales pitch got far more attractive in the past few years, when Congress gave the idea an inadvertent boost.
“I call it the trust tsunami of 2012,” McDowell said.
The reason most Americans don’t have to worry about the estate tax — fewer than one in 700 pay it — is because Congress applies the tax, and related taxes on other transfers to heirs, only when a fortune exceeds certain thresholds. For complicated reasons, the amount that most people can place in dynasty trusts is usually limited to one of these exemptions, which was set at about $1 million throughout the 1990s. It’s the size of the glass into which a wealthy family can pour the wine.
Throughout the 2000’s, this exemption rose, and by 2011, it reached a record $5 million per individual. The temporary law was scheduled to expire after 2012, at which point it would revert to $1.4 million. Congress didn’t act to make the higher amount permanent until Jan. 1, 2013.