Sunday, January 17, 2010

Tip Of The Week: You May Need To Alter Will

The Wall Street Journal's article on January 17, 2010 is entitled "You May Need To Update Your Will." The article relates to what I have written about this month - the recent repeal of the federal estate tax for 2010 and the uncertainty of when, how and whether Congress will pass a retroactive law.

The article is educating its readers on how the recent repeal of the federal estate tax could have one consequence families may not be aware of: some people who do not update their wills could end up leaving nothing to their spouses.

The reason this could happen is as follows. It is a common practice for people to use formulas in their wills designed to send the maximum amount of assets not subject to the estate tax into a trust, often for their children. The remaining assets are usually left to the surviving spouse.

But at this moment in 2010, there is no limit on the assets people can pass to their heirs without being subject to federal estate tax. So there are some wills and trusts where all of the assets could go into a trust and the surviving spouse would get nothing.

There is some relief for these spouses if wills are not updated since most states allow a surviving spouse to claim part of the estate even if he or she has been disinherited. However, this can be an expensive court process.

To avoid potential problems, people should review their wills with their estate planning attorney and determine if they need to revise their wills. For those people who left all assets to the trust without any to the spouse, it may be appropriate to remove the formulas and use dollar amounts instead to designate where assets should go. Another idea to consider is whether to transfer some assets to a spouse now, so he or she has sufficient funds directly in his or her name.

There are numerous planning tools - and each individual situation is different. Once the law is passed and retroactive -- as is predicted by me and most estate planning experts -- the will will need to be revisited once again. Remember to set up everything as if you would die tomorrow. Procrastination in this area can lead to many unintended consequences.

Posted by Henry Moravec, III. Henry (Hank) Moravec is a partner at Moravecs, A Professional Law Corporation in San Marino, California, a suburb of Los Angeles. He focuses his practice on Estate Planning, Probate, Trust Administration, Beneficiary and Trustee Representation, Tax Law, and Nonprofit Law.

Should you have any questions regarding your own situation, you can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210. The firm website is