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What is “Portability” in Federal Estate Tax Planning?

What is “Portability” in Federal Estate Tax Planning?

In estate tax planning, “portability” means that when a spouse dies, any unused estate tax exclusion amount transfers to the surviving spouse. The surviving spouse can add the deceased spouse’s unused exclusion to their own exclusion. For the portability rule to be effective, an estate tax return must be filed immediately after the first spouse dies.

In 2015, each person can leave or give away up to $5.43 million without owing estate tax. With the portability rule, this means that couples can leave $10.86 million in total, even if the first spouse dies without giving their portion away. Estates over $5.43 million per person will be taxed at 40%.

The benefits of portability can be significant for a family. When one member of a couple dies, their money goes to their surviving spouse. If the deceased did not use their exclusion amount, portability allows the surviving spouse to leave the rest of their family up to twice as much money, without it being taxed.

Portability has the potential to simplify estate planning. However, it is essential to have an experienced attorney help you handle certain complications, such as:

  • In recent years, Congress has raised the maximum exclusion amount significantly. It is possible that it could be lowered again, meaning that you will not be able to leave as much of your estate to your family, tax-free.
  • If the surviving spouse remarries, portability becomes more complicated. If the surviving spouse also outlives their next spouse, the surviving spouse must use the amount of unused exclusion of their last spouse.

A knowledgeable attorney at Stubbins, Watson & Bryan Co., L.P.A. can further explain how portability works and can help you through any issues that may arise. Contact us online today to learn more about what our experienced federal estate tax lawyers can do for you.

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