Newly passed legislation in New York amends EPTL Sec 2-1.13 to correct a problem occurring where wills and trusts executed  prior to December 31, 2009 involve the estates of persons dying this year. As we reported earlier here, formula clauses bequeathing "an amount equal to the amount that can pass free of federal estate tax" create a problem with the sunsetting of the estate tax this past January 1st. Taken as written, they would include not a portion of the estate but the entire estate since there is no estate tax this year and the entire amount of the estate would pass free of tax (the same would apply where this formula was used in conjunction with  a generation skipping transfer tax situation). The upshot of this would be to disinherit a charity or the surviving spouse since it would normally be expected that they would directly receive any amount over the old credit shelter limit (for example, $3.5 million in 2009).

The new legislation provides that where a  2010 decedent’s will or trust contains such a provision, the terms of this provision are to be construed under the Internal Revenue Code in effect on December 31, 2009. In the off chance that an executor or trustee believes that this new saving provision in the law does not comport with the intentions of the decedent, the fiduciary has twelve months from the date of death to bring a proceeding to opt out of the new law.

All in all, it looks as if the New York State Legislature has finally gotten it right this time. As the late Joan Payson Stevens , the original owner of the New York Mets remarked after the team broke a nineteen game losing streak in the early sixties, "You can’t lose em all!".  Of course, all bets are off for 2011 when absent any Congressional action, we revert back to the old one million dollar limits. What will happen next is anybody’s guess.