Contact Us Online

Social Media Karp Law Blog Twitter Facebook

New Tax Law May Imperil Spouse in 2010

2-21-2010 - The lapse of the federal estate tax in 2010 may create unpleasant consequences for married couples with substantial assets and older estate plans. Many of those plans include separate trusts for each spouse that requires "as much tax-free money as possible" to flow into a credit shelter trust when the first spouse dies, with the remainder of the decedent's assets passing outright to the survivor. Income from the credit shelter is generally available to the survivor, but not the principal, which passes to the children upon the survivor's death.

What's wrong with this picture? Given today's tax situation, a great deal. Because there is no estate tax at present, there is no limit on the amount of tax-free money that can be passed. So if one spouse dies today, all of his/her assets will pass into the credit shelter -- effectively disinherting the surviving spouse.

The estate tax may return in 2010 if Congress acts, and in 2011 it is scheduled to return. It's anyone's guess as to what will happen. But now, while we remain stuck in this estate tax limbo, couples with these kind of estate plans are in perilous waters. If this describes you, consult a certified elder law/estate planning attorney to update your estate plan and protect your spouse.

Back to Elder Law Legal Updates