Do You Need A Codicil Or Trust Amendment To Protect Your Family If You Die In 2010 (And Before The Effective Date Of Any Change In The Law)?
Congress' failure to prevent a one-year repeal of the estate and generation-skipping transfer tax ("GST") may provide estate planning opportunities, but there are also potential pitfalls.
Many clients have estate plans that dispose of assets at death by referencing the amount that can pass free of estate tax by reason of the unified credit under Section 2010 of the Internal Revenue Code (also known as the “applicable exclusion amount”) or by a formula based on the GST exemption. If a client were to die in 2010 while estate tax and GST repeal was in effect (and if the law is not changed retroactive to January 1, 2010), it is not clear how the client’s estate would pass. It is possible that the client’s entire estate would pass under the credit shelter trust or GST-exempt trust provisions of the Will or Revocable Trust, but it is also possible that the IRS would take the position that these formula clauses result in no funding of a credit shelter trust or GST-exempt trust. In some cases, neither result would be consistent with the client's wishes.
You may choose to do nothing at this time, based on the probability that either you will not die in 2010, or that Congress will reinstate the estate and GST taxes retroactively. However, if you do not want to take these chances, we suggest that you contact us to review your estate plan. We would be happy to work with you to determine what simple changes to your Will or Revocable Trust may be prudent at this time.