Law for the Masses: the Estate Plan

Today I spent some time with my partner, Scott Geneva, and I learned that everyone should be reviewing their estate planning documents this year. Typically, attorneys recommend that you should, at the very least, review your plan every 3-5 years. But this last year has seen some major changes in both Federal Estate Tax Law and in Ohio Law. Because it was so painful to go through the process the first time (not with Scott!), I told him I needed a tangible example to force me to move on this. So, he told me about a plan he reviewed last week.

As it turns out, most estate planning documents use formulas, not dollar figures when describing what money will go to whom. Instead of saying: "Leave $500,000 to my kids' trust, and the remainder of my property to my husband," the plan document Scott reviewed said: "Leave whatever can pass tax free to my kids’ trust, and the remainder to my husband." Since the client signed the plan ten years ago, the law has gone through a number of changes.

Ten years ago, a person could pass about $675,000 dollars tax free. But since then, the amount has steadily increased to 3.5 million dollars. This year a person may pass an unlimited amount of money tax free (at least under the current law). So, under the plan above, the client left "whatever would pass tax free" to her children (now an unlimited amount), and in the process, she has disinherited her husband.

Thankfully, it is a quick fix. But only if you have someone look at the documents!