• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • WHO WE ARE
    • About Our Firm
    • Attorney and Staff Profiles
    • News and Events
  • Areas We Serve
    • Essex County, MA
      • Andover
      • North Andover
    • Hillsborough County, NH
      • Manchester
      • Nashua
    • Middlesex County, MA
      • Concord
      • Lexington
      • Wakefield
      • Winchester
      • Woburn
    • Rockingham County, NH
      • Exeter
      • Londonderry
      • Salem
  • Services
    • Asset & Business Planning
    • Elder Law & Medicaid Services
    • Estate And Gift Tax Figures
    • Family-Owned Businesses & Farms
    • Legacy Planning Services
    • LGBTQ Estate Planning
    • Loss Of A Loved One
    • Pet Planning
    • Power Of Attorney
    • Probate and Trust Administration
    • SECURE Act
    • Special Needs Planning
    • Young Families
  • Elder Law
    • Coping with Alzheimer’s
    • Hospice Care
    • Medicaid Planning
    • Nursing Home Planning
  • Resources
    • Elder Law
      • Elder Law & Medicaid Definitions
      • Elder law reports
      • Elder Law Resources
        • Elder Law Resources – Londonderry, New Hampshire
        • Elder Law Resources North Andover, Massachusetts
        • Nashua, New Hampshire Elder Law Resources
        • Woburn, MA Elder Law Resources
    • Estate Planning
      • Estate Planning Articles
      • Estate and Gift Tax Figures
      • Estate Planning Checkup
      • Estate Planning Definitions
      • Estate Planning Reports
        • Advanced Estate Planning
        • Basic Estate Planning
        • Estate Planning for Niches
        • Trust Administration
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Top 10 Estate and Legacy Planning Techniques
    • Free Estate Planning Worksheet
    • Free Seminars
    • Frequently Asked Questions
      • Asset Protection Planning
      • Business Planning
      • Charitable Gifting
      • Estate Planning
      • Elder Law
      • Frequently Asked Questions for Families Without an Estate Plan
      • Incapacity Planning
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Medicaid Planning
      • Trust Administration & Probate
      • Wills and Trusts
    • Newsletters
    • Pre Consultation Form
    • Presentations
    • Probate and Trust Administration
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • Loss Of A Loved One
      • Probate Resources
        • Nashua, New Hampshire Probate Resources
        • Probate Resources – Londonderry, New Hampshire
        • Probate Resources – North Andover, MA
        • Probate Resources – Wakefield, Massachusetts
        • Woburn, MA Probate Resources
      • The Mourner’s Bill of Rights
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • Things You Need To Do When a Loved One Passes Away With a Will
      • Trust Administration & Probate Definitions
    • Published Books
  • Live Seminars
    • Online Seminars
    • In-Person Seminars
  • Videos
  • Contact Us
  • Blog
  • Reviews
    • Our Reviews
    • Review Us

DeBruyckere Law Offices, PC

Serving Southern New Hampshire & Essex Country, Massachussetts

Call us today(603) 894-4141

(978) 969-0331

Online Seminars
Attend Free Seminar
Home » Educational-Alerts » Failure to Review Estate Plans Periodically Can Lead to Unintended Consequences

Failure to Review Estate Plans Periodically Can Lead to Unintended Consequences

August 1, 2011

The estate tax law is a moving target, both at the federal and state level. This month’s Alert examines a case which illustrates how the changing laws can result in unintended results in your plan. Now, more than ever, it is important to review your estate plan periodically to ensure the outcome you want.The amount that can be distributed to children and other non-charitable beneficiaries free from federal estate tax at death is a constantly changing target. In 2000, this amount was $675,000. In 2002, it increased to $1 million. The exempt amount increased again to $1.5 million in 2004, to $2 million in 2006, to $3.5 million in 2009 and an unlimited amount in 2010. In 2011, the tax-free amount was scheduled to revert to $1 million, but the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (“TRA 2010”), which was passed on December 17, 2011, increased the amount to $5 million for 2011 and 2012. Under TRA 2010, the amount that can pass free from federal estate tax in 2013 is once again scheduled to drop to $1 million. However, President Obama’s budget proposal for 2012 anticipates tax revenues based on a $3.5 million estate tax exemption amount and most Republican tax proposals call for maintaining or increasing the $5 million exemption amount.With the increase by Congress in the amount that could pass free of federal estate tax, many states saw a significant decrease in the amount of revenue they were receiving from estate taxes. As a result of this reduction in revenue, many states enacted their own estate tax or inheritance tax that was completely independent of any changes that Congress might make to the federal estate tax system. As a result, the amount that can be distributed free from state estate tax or inheritance tax varies widely among the states.

As a result of all these complexities, it is possible in many states that a decedent’s estate could be distributed to beneficiaries free from federal estate tax, but be subject to state estate or inheritance tax. For example, Massachusetts, New Jersey, New York, and Oregon have estate tax exemption amounts of $1 million. So a resident of one of those states who died in 2011with a taxable estate of $3.5 million would escape any federal estate tax (because the taxable estate is under the federal $5 million exemption amount for 2011), but would have $2.5 million of his or her estate subject to state estate tax ($3.5 million taxable estate minus the $1 million state exemption amount).

Taxpayers sometimes have their estate plans drafted to leave the portion of their estate that can pass free of federal estate tax to children or other non-charitable beneficiaries with the balance to pass to one or more public charities, or to a private foundation created by the taxpayers. By doing so, all federal estate tax is avoided and taxes that would have otherwise been paid to the United States Treasury for estate taxes end up being paid to the charitable organizations. Of course, with differing amounts that can pass free of estate tax for federal and state purposes, the goal of paying no estate tax becomes much more difficult, if not impossible, to achieve. In addition, a move by the taxpayer from a state without estate taxes or with an estate tax tied to the federal estate tax exemption amount to a state with its own state estate tax system can destroy what would have otherwise been a perfectly planned strategy. Thus, a taxpayer who employs this type of charitable and estate planning strategy should revisit his or her plan with an estate planning attorney on a periodic basis to determine whether the plan still accomplishes what the client desires.

Consider the Wisconsin case of In re Estate of Zarobsky. In Zarobsky, Tillie Zahrobsky executed a codicil (amendment) to her Will in 2000 providing that, if her estate exceeded the amount that can pass free of federal estate tax, the surplus of her estate would be distributed to a local high school to which she had been a longtime donor. She desired the amount she left to the high school to be used for scholarships. At the time Tillie executed the codicil to her Will, Wisconsin had no separate inheritance or estate tax. The amount that could pass free of federal estate tax was $675,000, so the amount of her taxable estate over that amount would be distributed estate tax-free to the high school.

At Tillie’s death, the amount that could pass free of federal estate tax had risen to $1.5 million. However, Tillie’s estate was only $1 million at that time. In another twist, in the period between the execution of her codicil and her death, Wisconsin enacted its own state estate tax with a $675,000 state tax exemption amount. As a result of these changes in the law, none of Tillie’s estate was distributed to the high school. It is unknown from the facts whether that is what Tillie would have wanted or not.

The high school believed it was not Tillie’s desire that the high school receive nothing from her estate. The high school brought litigation to have the Will interpreted so the amount of its bequest should be measured by the new Wisconsin estate tax exemption amount of $675,000 and not the federal exemption amount of $1.5 million.

The Wisconsin Court of Appeals held that Tillie could not have intended that the state exemption amount was applicable, since it was nonexistent at the time Tillie executed the codicil to her Will. As such, Tillie’s gift to the high school failed. Unfortunately, we will never know if that is what Tillie really wanted!

Our law firm focuses its practice on estate planning and administration of trusts and estates, including lifetime and testamentary charitable planning strategies. As a member of the exclusive nationwide group of estate planning attorneys, the American Academy of Estate Planning Attorneys (http://www.aaepa.com), we are kept up-to-date of new tax developments as they occur and we receive continuing legal education regarding how to effectively plan for these law changes. You can take advantage of our specialized knowledge by scheduling a free consultation with one of our attorneys for yourself or one of your clients by calling or visiting our website.

DeBruyckere Law Offices, PC

Download our free Estate Planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.
  • This field is for validation purposes and should be left unchanged.

Subscribe to Our Newsletter

Please fill out the form below:
  • This field is for validation purposes and should be left unchanged.

Follow Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube

Testimonials

I felt complete trust and confidence in Dan DeBruyckere and his staff. They have a caring, low-key approach and there is no pressure to add products to the estate plan; rather he makes me aware of changes in the law, etc. I always learn something new to assist me in our planning!

LN

Your seminar was the only seminar we attended without financial advisors wanting to invest our money instead of protecting it! The information this firm provided was easy to understand even though it is a difficult topic. Thank you for all of your help!

HR

We both felt so comfortable in they way our Estate Planning was handled. We felt like someone was watching out for our best interest. Everyone we worked with at the firm was thorough, and explained everything in a way where we could walk away feeling like everything was complete.

RS

A truly great experience all the way through. Felt like we were a part of the family! Thank you.

LW

We could not have picked a more qualified law firm. Everyone that we came in contact with made us feel at ease.

Happy Client

We were very impressed with the statements put forth by Dan at the Seminar. We were impressed even more by their down to earth approach and the efficiency they accomplished it all.

Charles

Londonderry Office

Londonderry Office
One Verani Way
Londonderry, NH 03053
Phone: (603) 894-4141

See Larger Map Get Directions

Nashua Office

Nashua Office
76 Northeastern Boulevard, Unit 31B
Nashua, NH 03062
Phone: (603) 894-4141

See Larger Map Get Directions

North Andover Office

North Andover Office
231 Sutton St, Suite 1B
North Andover, MA 01845
Phone: (978) 686-4645

See Larger Map Get Directions

Woburn Office

Woburn Office
444 Washington Street, Suite 503
Woburn, MA 01801
Phone: (978) 969-0331

See Larger Map Get Directions

By Appointment Only

BEVERLY OFFICE

Beverly Office
900 Cummings Center Suite 204-U
Beverly, MA 01915
Phone: (978) 969-0331

See Larger Map Get Directions

Office Hours

Monday9:00 AM - 5:00 PM
Tuesday9:00 AM - 5:00 PM
Wednesday9:00 AM - 5:00 PM
Thursday9:00 AM - 5:00 PM
Friday9:00 AM - 5:00 PM

Map

dadlawoffices_sidbr_map
  • Advantages of Working With Our Firm
  • About The American Academy
  • Disclaimer
  • Privacy Policy
  • Sitemap
  • Contact Us

Connect with Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube
footer-logo

© 2021 DeBruyckere Law Offices
All Right Reseved.

Attorney Advertisement

© 2021 American Academy of Estate Planning Attorneys, Inc.