Finance Quick Answers
Should I be careful with the wording in my will in reference to the amount I can leave to my family estate-tax free?
A tax law passed in 1998 made it important to review tax strategies early in the year. But don’t make the mistake of letting the tail wag the dog by seeking short term savings while neglecting basic financial planning principles. All your major tax strategies should be examined in the context of your larger financial situation. A key area of concern is new year planning.
You’ll want to revise your will and estate plan. The
new tax law increases the amount each taxpayer can
bequeath free of estate tax from $625,000 in 1998, in
annual steps to $1 million in 2006. Because the
tax-exempt amount rises each year, wills should now use
"formula language" instead of an exact dollar amount.
They should refer to the maximum exempt amount for the
year instead of a specific number such as $625,000.
Failure to adopt formula language could prove costly to
Source: Taylor, R. (1998, February 15). Shrewd tax and financial planning moves the new tax law invites you to look into...now. Bottom Line Personal, 7-8.
Sandra McKinnon, Consumer & Family Economics Specialist, University of Missouri Extension
Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension
Last update: Thursday, July 31, 2008