Avoid the 3.8 Percent Medicare SurtaxAvoid the 3.8 Percent Medicare Surtax

With the Supreme Court upholding the health care insurance reform of the Affordable Care Act earlier this summer, the additional Medicare taxes of 0.9 percent (wages) and 3.8 percent (investments) look increasingly certain to apply in 2013, especially with President Obama’s re-election. Much has been written about individual financial and tax planning for this surtax. I’ll review the basics of the surtax and then focus on various proactive opportunities for trustees to avoid it, especially with respect to common bypass and marital trusts (“trusts” refers solely to non-grantor, non-charitable trusts).

The Basics 

For individuals, the 3.8 percent surtax will apply in 2013 to the lesser of net investment income or the excess of a taxpayer’s...