Virginia Enacts Protective Law for Estate Tax "Formula" Provisions

Virginia's new law is designed to prevent unintended consequences of a person dying in 2010, while the federal estate tax law is in a one-year hiatus, with a Will or revocable trust premised on federal estate tax principles being applicable. If this happens, the decedent's Will and trust formula provisions are deemed to refer to the 2009 federal estate and GST law as they would have applied to a person dying on December 31, 2009. For example, if a Will provides for funding a Family Trust (aka credit shelter trust) under a formula provision referring to the maximum amount that can pass free of federal estate taxes, such clause would be interpreted as if the 2009 federal estate tax law were in effect. In general, this means that the funding of the Family Trust is limited to the $3.5 million estate tax exemption available in 2009, rather than being 100% of the estate in the absence of the federal estate tax being in effect.

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