A formula clause is a provision in estate or gift documents that uses an adjustable formula-often tied to exemption amounts or valuations-to allocate assets among spouses, trusts, or beneficiaries. Common examples split assets between marital and credit-shelter trusts based on the applicable exclusion. Formula clauses help plants adapt automatically to changing tax laws or final values without constant amendments. They require careful drafting to avoid unintended funding outcomes and often coordinate with life insurance for liquidity, equalization among heirs, or replacement of assets allocated to charitable remainder vehicles.

Drafting attorneys use formula clauses to fund marital and credit-shelter trusts efficiently as exemptions change. Advisors model outcomes, verify titling, and coordinate insurance for liquidity and equalization so automatic funding does not create cash-flow problems for spouses or businesses.