Estate Tax Exemption Portability – What is it and what does it mean?

Estate Tax Exemption Portability allows for the unused estate tax exemption of the predeceased spouse to be transferred to the surviving spouse. Portability helps to address the estate planning problems of unbalanced asset ownership and inefficient estate planning.

For example assume the predeceased spouse uses only $3 million of his $5,350,000 exemption, without the ability to make the portability exemption, the unused amount of $2,350,000 would be lost. On the contrary if an election for portability is made, the unused exemption amount, in this example, $2,350,000 can be transferred to the surviving spouse, thereby increasing her federal exemption amount to $7,700,000 ($2,350,000 + $5,350,000).

Portability does have many requirements and restrictions. Most importantly is the requirement to make an election to use portability by filing a federal estate tax return (form 706) even when one might not be required. Portability and the need to file an estate tax return should be considered for every estate regardless of value.

For more information on estate tax exemption portability or estate planning in general, please contact Lori Kirk, CPA at lkirk@katzabosch.com or 410.307.6416

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