Want Your Will or Trust To Work Better?
The New Federal Estate Tax Law Changes What’s Important
Now You and Your Lawyer Will Want To Pay Attention To
Different Things and You Can Do More Than Ever Before
Under the federal estate tax law in effect since the 1980s, the emphasis
for wills and trusts was always minimizing federal estate tax. And even
though your wishes should be primary, most lawyers focused on taxation.
But that might be the most important part of the game any more.
You see, Congress recently enacted a new law which radically alters the
estate tax law, but only for a period of two years. What happens after
24 months is anyone’s guess.
1) The tax could be eliminated.
2)The amount that could be sheltered from tax could go back to only
$1 million.
3)The shelter amount could be permanently raised to five million
dollars and adjusted for inflation, as it is now.
For that reason, there are two new factors that will drive well written and
well thought out estate plans from now on. First, such plans must be
flexible about protecting estates from estate tax in each of the possible
scenarios above.
That probably means that your existing plan with trusts under the will no
offers the right level of flexibility and may not even work because of issue
two below.
Next, because the estate tax might or might not exist, updated wills, trusts,
and estate plans should be flexible enough to allow assets put into trusts to
later be redistributed to a spouse so the family can inherit assets at a
stepped up basis and get a big income tax benefit.
In other words, you probably need a will or trust that can save on estate
taxes if they exist, and save on income taxes if the estate tax goes away.
And, most current wills do not have this flexibility.
This is a complicated issue and you should consult your estate panning
counsel.
However, if your assets including insurance and retirement benefits and
those of your spouse, together with joint assets exceed one million dollars
you still need to consider these issues.
If your assets are less than one million dollars, you
now have an unprecedented opportunity to focus on what matters to your
family such as divorce protection and protecting your spouse and kids from
lawsuits than ever before.
