At least, that’s what SmartMoney (part of the Wall Street Journal network) calls them, though that may be overselling the point a bit.
Now that we are eight months removed from the Tax Relief Act of 2010, tax and estate planning professionals have had a good chance to digest some of the implications of the Act. Among the things SmartMoney notes are potential changes to asset protection strategies, certain types of trusts, and the hazards posed by individual states that have their own estate tax regime (16 of them, plus the District of Colombia). The most salient point for me is the one on “formula clauses” in wills. Excerpt:
Let’s say you and your spouse have $4 million, divided equally. Your will, prepared in 2001, might very well call for “an amount up to the federal estate-tax exemption” to be transferred to a trust for the benefit of your children, with the balance passing to your spouse. The exemption in 2001 was $675,000, so if you died that year with a $2 million estate, the former amount went to the trust, and $1.3 million went to your spouse.
It’s a different story now that the estate-tax exemption has risen to $5 million. If you die tomorrow with a $2 million estate, the same wording would deliver all that money to the trust. Your spouse gets nothing.
Changes in estate law should always be an opportunity for you to re-look at your will and the rest of your intentional estate plan, just to ensure that what you want to happen when you pass away is actually what will happen.