Portability and the Estate Tax Exemption

The New Year’s Day fiscal cliff bill, which ended an 11-year period of uncertainty about estate tax exemptions and rates, also made permanent a wonderful break for widows and widowers that was set to expire after a two-year introductory period.

Sometimes it’s just nice to celebrate that good news is still good news. One positive of the Fiscal Cliff deal, ATRA 2012, is the continuation of certain estate and gift tax laws.

A recent Forbes article titled “A Married Couple's Guide To Estate Planning,” explores some important considerations when it comes to fundamental estate planning.

As so many of us hoped it would, the fiscal cliff-bridging budget extended the provision known as “portability.” As you may know, portability is the ability to pack up the unused tax exemption of the first spouse – that is, their gift/estate tax exemption – and pass it on to the surviving spouse. The surviving spouse doesn’t have to worry quite as much about triggering the estate tax when they pass. Why? Because they now have everything they own plus everything their spouse left them, and all of it can be sheltered from estate taxes by the estate tax exemptions of both spouses.

The original article has more to say regarding how to secure this portability. For that matter, portability is also a limited achievement and a limited kind of protection between married persons.

When all things are considered, you would be well-advised to consult with your estate planning attorney. There is more to “portability” and proper estate planning than meets the eye.

Reference: Forbes (January 9, 2013) “A Married Couple's Guide To Estate Planning”[updated to ATRA 2012]