Minimize Estate Tax Uncertainty: Update Your Estate Plan
With the estate tax in flux this year, you may want to revise your wills to make sure your bases are covered. If you have a will that leaves assets to a person based on an estate tax formula it may need revision. For instance, some wills leave assets to children based on an amount that can pass free of federal estate tax. If this is the case, in 2010, presumably all assets would pass to those children under this language. Such a scenario may leave little or nothing for a surviving spouse. Often this is not a person’s intent. Additionally, you may want to have language included to address an estate tax with a $1 million exemption limit or a higher limit, depending on what Congress does or does not do later this year.
You should also consider to whom your assets will pass and how they will be affected by the capital gains tax. If you are leaving more than $1.3 million to someone other than your spouse, you may want to make sure your executor knows how to allocate the step-up in basis, applicable to estates of persons dying in 2010. If the basis step-up won’t cover all such assets (so as to minimize future capital gains taxes on an asset’s sale), it may be wise to include language guiding the executor to allocate the basis step-up in a manner that minimizes the tax burden on all beneficiaries. Hopefully such language will reduce the potential for strife among family members.
