• Estate taxes still need to be considered. While the estate tax exemption amount is increasing (from $2,000,000 in 2007 to $3,500,000 in 2009) and the estate tax will be repealed in 2010, this amount will drop back to $1,000,000 in 2011 unless further legislation is enacted. Thus, individuals with estates over $1,000,000 still need to consider ways to use their exclusion amounts to minimize estate taxes. Those with large estates probably do not want to leave their entire estate to their spouse. While that will avoid estate taxes on the first spouse’s death, estate taxes may be owed after the second spouse’s death if the estate is larger than the estate tax exemption. While increasing estate tax exemption amounts can make it more difficult to plan, you should still consider leaving part of your estate to other heirs. If you do not want to make outright distributions in case your spouse needs the assets, you can set up a trust (commonly referred to as a credit shelter or bypass trust) to hold those assets. Your spouse can then use the income and even some of the principal, with the remaining assets distributed to your heirs after his/her death. This preserves the use of your exclusion amount.

• Review whether you need a second trust. You may also want to control the remainder of your estate that is not placed in the bypass trust. Leaving the remaining assets to your spouse means he/she will control the ultimate distribution of those assets. Thus, if your spouse remarries, his/her new spouse may inherit some or all of those assets. Or, if you have children from a previous marriage, you may want to ensure those children receive a portion of your estate. Typically, a Qualified Terminable Interest Property Trust (commonly referred to as a QTIP trust) is used in those situations. Any assets not placed in the bypass trust are placed in the QTIP trust, with income distributed to your spouse during his/her lifetime. This qualifies for the unlimited marital deduction, so estate taxes will not be assessed when you die. After your spouse’s death, the principal is distributed to the heirs you designated.

• Determine whether disclaimer provisions should be added to your estate planning documents. This provision details what happens if one of your heirs disclaims his/her inheritance. With the estate tax exemption amount fluctuating over the next several years, this provides a way for heirs to decide after your death how much should be placed in various trusts. This leaves a great deal of flexibility with your heirs, so the strategy should only be used if you trust their judgment.

• Consider preserving your generation-skipping transfer tax amount. Leaving assets to wealthy children often means estate taxes will be paid when your children receive the assets and then again when your grandchildren receive the assets. Bequeathing the assets directly to the second or third generation can reduce estate taxes. However, the generation-skipping transfer (GST) tax, which is set at the highest estate tax rate, will apply to amounts transferred in excess of your GST exemption, which follows the estate tax exemption schedule. Again, if you do not want to make outright gifts to heirs, you can set up a trust so your spouse has access to the funds during his/her lifetime.

• Check beneficiary designations and joint ownership of assets. Assets like life insurance, annuities, 401(k) plans, and individual retirement accounts will pass directly to beneficiaries, while joint assets, including bank accounts, investment accounts, and real estate, will pass directly to the joint owner. Provisions in your will and other estate planning documents cannot change those designations. Thus, review beneficiaries and joint owners to ensure that assets will transfer as you wish. Tax and estate planning considerations may make another individual a better choice. Once your spouse dies, be especially careful of joint ownership with just one of your children. While you may expect that child to share the asset with his/her siblings, that child may either not do so or may have to deal with gift tax complications.