New Estate Tax Break and Exemption Portability

Mar 11, 2011 Willow Creek Wealth Management Posted in Articles

Exemption Portability Simplifies Estate Tax Planning

The tax overhaul bill signed into law last December 2010 contained a little-touted change in estate tax exemption rules. As of 2011, a spouse can utilize any unused estate tax exemption of the spouse who dies. Not only does it mean that together spouses can transfer up to $10 million tax-free, but it eliminates the need for a bypass trust in many cases. Some states have estate taxes and none have this portability provision, so for this and other reasons a bypass trust can still be useful. You will want to discuss your options fully with your attorney. Taking advantage of this portability is not automatic, so the executor will need to file an estate tax return to transfer the unused exemption to the survivor. It is a good idea to file even if spouses have combined estates of under $10 million because you never know. The portability provision is set to expire December 31, 2012, but many feel Congress is likely to renew it. The article link goes into more detail and sites some nice examples. Article Link