Revisited Your Estate Plan Lately? New Federal Estate Tax Laws and Declining Asset Values May Warrant Some Changes!


I remind my clients often to contact us immediately any time there’s been a significant change in their lives, including, but not limited to:  the death of a beneficiary or anyone else named in your will, a change in marital status, new children, a change in state residence, and, as we’ll discuss in more detail, a significant change in the value of your assets or a change in tax laws.

It’s no secret that the majority of Americans have been impacted by the current economic crisis.  Investment values have sharply declined, leaving many (particularly those nearing retirement) unsure of what to do with their assets.

This financial uncertainty, coupled with the January 1, 2009 increase of the federal estate tax exemption from $2 million to $3.5 million, may be causing a shift in your estate plan.

How?  Very often, estate plans can use formula clauses to fund a bypass (tax savings) trust with assets up to the maximum amount of the federal estate tax exemption ($3.5 million) with the “remainder” of the estate (often including IRAs and 401(k) accounts) passing to a surviving spouse.

For example, a client may wish for a set percentage of assets to pass outright to a surviving spouse.  But, lower asset values and the higher estate tax exemption may result in an inadequate amount.

Another area for concern is with charitable gifts or distributions to children, grandchildren or other relatives on the death of the first spouse.  With fewer assets to go around, one might be concerned about making such allocations out of concern that there won’t be enough left to a surviving spouse.

The bottom line?  Not all estate plans are created equal and they certainly can require updating.  After all, an outdated or inadequate plan is often worse than no plan at all.

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