Many people have taken a “wait and see” approach to estate planning this year, expecting Congress to reinstate the estate tax.
It hasn’t happened yet, and it looks like it won’t happen anytime soon. Congress has a full plate, and limited working days left before it’s back on the campaign trail.
That means the waiting is over and now’s the time to update your existing will and trust documents.
Most estate plans use “formula clauses” to allocate estate assets to trusts and other beneficiaries. And these formula clauses are generally tied to the estate tax and the estate tax exemption amount.
The repeal of the estate tax can change how estate assets are allocated and cause unintended results. And some beneficiaries might be inadvertently “disinherited” while others receive unintended windfalls.
Without a “fix”, the surviving spouse or marital trust might receive everything or nothing, depending on the drafting language. Or the family trust could receive everything or nothing.
A “contingent” formula clause is the best way to avoid these unintended results.
The concept goes like this:
If there is no estate tax, then allocate the estate assets this way. If there is an estate tax, then allocate the estate assets this way.
This is a Big Time oversimplification, but you get the idea.
Like we said, the waiting is over and now is the time to update your exisiting will and trust documents.
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This is really interesting. Thanks for posting it. By the looks of the comments, many others think so too.
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