The U.S. federal estate tax has been repealed.
This came about under a 10-year bill that steadily increased exclusions from the tax before fully repealing it in 2010.
That’s obviously good news for most Americans.
However, there is one issue that many people might not know about.
The negative consequence is that Americans who don’t update their wills could leave nothing to their spouses.
Wills typically use formulas designed to send the maximum amount of assets that are not subject to the estate tax into a trust.
The trust is usually for the decedent’s children.
Remaining assets are then left to the surviving spouse.
Under the new law, there is now no limit on the amount of assets people can pass on without being subject to federal estate tax.
Therefore, all the assets could go into a trust – leaving the surviving spouse with nothing.
However, there is a way around this.
Most states will let a surviving spouse claim part of the estate in such a situation. But the process can be costly, so it makes more sense for people to revise their wills.
The key to success is using dollar amounts instead of formulas to designate where assets should go.