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Bypass trusts may not be needed any longer

Some New Yorkers that have drafted wills in the past mistakingly believe that once these documents are written, they don't have to do anything more. Since both the law and life itself often involves change, failing to revisit a previously drafted will may have unintended consequences for the testator's family.

One holdover in many people's wills is the inclusion of bypass trust provisions. These trusts were often included in wills when the estate tax exclusion amount was at $675,000. When a spouse died, assets were passed to the trust instead of the survivor, and the transfer to the trust was a taxable event. This helped people avoid estate taxes.

Now, however, the estate tax exemption amount is $5.45 million. This means many people that may have previously needed bypass trusts no longer do. Surviving spouses are also able to now double the amount without using such a mechanism, meaning up to $10.9 million may be excluded if it is done properly. People should thus review their wills and remove provisions providing for bypass trusts, as they are not needed and are expensive. Other updates will be needed when a person's family changes, such as because of a divorce, a remarriage or the birth of new grandchildren or new children.

It may be smart for people who have wills that were drafted some time ago to visit with their estate planning attorney. Legal counsel may be able to review the will and look at it through the lens of the current tax and estate laws and may then be able to recommend changes and modifications that provide better benefits. An attorney may also be able to suggest other types of estate planning documents that may be important, including trusts and powers of attorney.

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