Anyone who has written a will with an eye to the effects of the federal estate tax may wish to pull the will off that dusty shelf in the closet (actually a safe deposit box is a better place for such storage) and assess its effectiveness. Congress (they’re the ones with the clown hats) may make further changes to the Internal Revenue Code this year to eliminate the many unanswerable questions which presently arise in planning estates of more than $1,000,000 (which is currently the personal exemption of anyone who dies).
To refresh, at this moment anyone dying in 2003 with an estate of less than $1,000,000 pays no federal estate tax. The exemption will increase to $1,500,000 in 2004, to $2,000,000 in 2006, and to $3,500,000 in 2009. Then, like magic, poof, the tax disappears altogether for those who have the good sense to die in 2010; just as magically, the tax is scheduled to return in 2011, when the exemption is scheduled to drop back to $1,000,000! In a sea of incongruity this is one of the strangest things that Congress has ever done; but it is the state of the law at this moment.
Given the mood of the President and Congress, all of which are of the same party, it is likely that something will be done either this year or next to eliminate our muddle, though with record deficits looming, it is anyone’s guess where Congress’ largess will end. The total elimination of the estate tax seems to be a very high priority with the President.
Dealing with the law as it is today and taking into consideration the devastation that the stock market has wrought on most estates, it may be appropriate to simplify your estate plan because the impact of the federal estate tax on it has been greatly diminished or eliminated altogether by the confluence of the changes in the law and economy. As an illustration, you may find that those relentlessly ever-diminishing mutual funds have eliminated the estate tax as a factor in your estate plan. (Does anyone remember the halcyon days of the late ’90s when double digit growth was routine?) For married couples the 2003 exemption of $1,000,000 can easily be doubled to $2,000,000 (and in 2004, $1,500,000 will really be $3,000,000 for married couples); if your estate is at or below those amounts, perhaps a complex trust or asset transfer that made sense two or three years ago could now be revised or eliminated.
It has always been a wise policy to review a will every 18 to 24 months because circumstances and laws change. Though a will deals with death, until that moment it should be a living document. To blow off the dust and read it periodically does not necessarily mean you will change it, but it can provide peace of mind to know at any given moment that your will properly reflects your intentions.
— Ken Butera