Is Your Will or Trust Outdated?

If your Will or Trust was drafted more than three years ago, it should be reviewed. If it was drafted more than 10 years ago, it could contain provisions that would be detrimental. This is particularly true if your estate plan contained provisions for estate tax planning. At that time, estate tax planning was a primary consideration in drafting. For those dying in 2015, the amount that can be inherited without being subject to the federal estate and gift tax is $5,430,000. For most people, capital gains tax is now much more important than estate tax.

I recently updated an estate plan for a couple with a nontaxable estate. When they executed their last estate plan 15 years ago, there was no question that their estate was taxable at that time. Their Will did not even account for the possibility that the second to die would not need to file an estate tax return. Because of the wording, the first spouse to die would have disinherited his or her child unless the surviving spouse changed his or her plan.

In another recent case, my clients had created a family LLC to hold their land and began gifting shares to their children. At the time they created this LLC, they had a taxable estate, and were slowly shifting their LLC out of their estate. But now their estate is not taxable. The effect of their gifting plan was to ensure that their children took their basis and the membership interest conveyed.

For most estates, estate taxes are no longer the primary consideration. Of course, estate tax laws could change. So you should still consider estate tax implications in planning. But for most estates, the best way to handle estate tax planning is different now than it was 15 years ago.