With the ever-changing tax environment, many people have wills that not only are outdated, but could be very harmful to the surviving beneficiaries. With the estate tax exemption amount, $1M and under, many people set up their estate plan to provide money being paid into what were called family shelter trusts. These were trusts set up in your will that provided for money to your spouse and further provided money to a trust that was set up called the credit shelter exemption trust that would provide care to family members, sometimes including the spouse. Because of the credit shelter amount now being more than $5M, few people are in need of the credit shelter trust arrangements any longer. Unfortunately, the way many of these trusts were written, the family members other than the spouse are the beneficiaries of the credit shelter trust while the spouse is the beneficiary of the spousal trust. Many of these trusts were set up to be funded with the credit shelter amount funded first and any remaining assets after that to be paid to the spousal trust.
Again, because of the large amount that now exists for the credit shelter trust, most if not all of the family’s assets may be paid into the credit shelter trust and the spousal trust will go unfunded. If the credit shelter trust does not provide for the benefit of the spouse, you can leave your spouse with no money during his or her lifetime. This is certainly contrary to the plans of the will but nonetheless may be what you devised at the time. Please call our firm and we will be happy to review your estate plans with you to ensure that you have the appropriate plans in place for your family.