Is it okay to use an online will or trust?

If you own a business, you have assets that would pass to your spouse and/or children upon your death. At minimum, your ownership interest in your business would be included in your estate. Clients often inquire as to whether an online will or trust preparation form is "good enough" to address their estate planning needs. Unfortunately, with today's complicated tax structure, using an online service may save money in the short term, but cost big dollars later on. Let me explain.

You may know that the estate tax, otherwise known as the "death tax", was repealed effective calendar year 2010. So, if you die in 2010, as the law stands today (and until congress likely imposes a new estate tax retroactively), you could pass any amount or money, or value of property, to your heirs without paying estate tax. As a business owner, your ownership interest in your business would be an asset of your estate, and the value of that ownership interest would be included in the value of your estate. Your heirs would receive a step up in basis if estate taxes were paid, but would not if congress does not reenact the estate tax. When your heirs sell the business, they would pay income tax on the difference. But what to do if the estate tax is reenacted and applied retroactively? There are many nuances and traps given the unsure nature of what will happen next with the estate tax (which will come back in 2011) this year. Without careful drafting of a will and trust to address your particular situation, you could fall trap to congress and over pay, now or later.