Greenville Estate Lawyer: “For A New Year – Have Your Estate Plan Checked”
January 18, 2010
If you have read any of my previous posts, surely you know that there is no federal estate tax in the year 2010. Unsurprisingly, this change in the law can have severe repercussions for your estate plan.
Some estate planners are sounding the alarm with regard to estate plans based on credit shelter family trusts and marital deduction trusts. These trusts are set up in such a way that the credit shelter trust gets funded with assets up to the amount that will not be subject to estate tax due to the previously existing estate tax exemption, while the marital deduction trust gets everything else. (This set up eliminates all federal estate tax when the first spouse passes away.)
The problem with this set up is that this year there is no estate tax, which means that the entire estate would get put into the credit shelter trust estate tax free. There would be no need for the marital deduction trust to be funded. Such a scenario could leave a surviving spouse out in the cold, as the credit shelter trust does not have to be for the sole benefit of the surviving spouse.
What is going to happen with this? Well, some probate judges are anticipated an increase in the number of will construction proceedings, where parties will argue that the tax law change has led to a result that the Decedent could not possibly have intended. This is fine and dandy, but the problem is that this extra bit of litigation will cost money to your estate. And it may not be necessary.
Under the current state of the estate tax law, the use of bypass trusts and marital deduction trusts is unnecessary, and could result in the unnecessary “trusting up” of assets, and the possible disinheritance of a surviving spouse. What should you do? Make an appointment to see your estate attorney. There are new techniques, including the use of disclaimer trusts, that could alleviate these problems, and provide flexibility as we move forward in an uncertain time.
Unfortunately, the state of the estate tax is such that this post only applies to the year 2010. In 2011, the estate tax comes roaring back, unless something is done before then. With the current state of politics, and an interesting special Senate election in Massachusetts occurring today where a Republican may take the seat that belonged to the late Ted Kennedy, who knows what is going to happen over the next year. The parties having injected politics into the estate tax over the last twenty years has led us to this unfortunate time where it is virtually impossible to tell estate planning clients that their estate tax planning or gift giving strategies are sound.