Estate and Elder Law

Is There a Trap Lurking in the Language of your Will?

In today's (October 15, 2009) Wall Street Journal, there is an article entitled "Is There a Trap Lurking in the Language of your Will?" written by reporter Laura Sanders. The article correctly points out that many semi-wealthy couples may have a serious problem in their Wills.  By "semi-wealthy" I mean estates worth up to $4 million.  Yes, I know for most people that is "superwealthy" but bear with me.
 
As the article explains it, the problem is that since 2001, the lifetime exemption, that is the amount of assets one could have at death before being subject to the estate tax, has increased from $675,000 to $3,500,000.  With proper estate planning, a married couple is able to use the exemption of both spouses. What happens is that upon the death of the first spouse, the amount of the remaining exemption is set aside.  This is generally done through what is known as a "bypass" or "credit shelter" trust, but sometimes can be given to the children directly or set up in a trust for their benefit.
 
The problem is that when an estate planning attorney drafts the will or the trust, they do not know what the exemption will be at the time of the client's death, and they don't know how much of the exemption the client will have already used up during their lifetime.