Tips From the Pros: Word Formulas That Don’t Work…and Those That DoTips From the Pros: Word Formulas That Don’t Work…and Those That Do

One of the most potent and useful tools in an estate planner’s toolbox is language by which property being gifted, sold, exchanged, swapped, disclaimed, appointed or distributed is precisely described in relation to its identity and value or just in relation to its value (formula language). Using formula language facilitates taking maximum advantage of, without exceeding, various tax-driven, dollar amount-limited exemptions and exclusions.

The Internal Revenue Service has accepted and, in some cases, explicitly sanctioned, the use of formula language in certain contexts¹ but has shown great hostility to it in others.² In the last several years, taxpayers, when challenged, have generally been successful in defending formula language,³ but ...