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Why You Should Know About Portability in Estate Planning and Estate Administration

On Behalf of | Apr 2, 2014 | Estate Planning |

What is Portability?

Portability first came into play at the end of 2010 with the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Then at the beginning of 2013, with the passage of the American Taxpayer Relief Act (ATRA), the portability of the estate and gift tax exemption between married couples became permanent. Basically, portability allows the unused tax exemption of the first spouse to pass away to be used by the surviving spouse at his or her death. Thus, it is a way to avoid possible estate taxes.

The Importance of Portability

In 2014, the federal estate and gift tax exemption is $5.34 million. This means that a person can pass up to $5.34 million at their death without being subject to the estate tax (although one must also take into account any gifts during the person’s lifetime as well that were above the annual gift exclusion). Thus, even if your personal estate in under $5.34 million, if you were to pass away, and all of your estate goes to your spouse, their estate could grow past the $5.34 million mark and then when they pass away, there could be estate tax consequences.


Let’s use an example. Let’s say that Husband has assets in his sole name (whether through life insurance, bank accounts, real estate, etc.) that are equal to approximately $4 million. Wife has assets in her sole name that are equal to approximately $2 million. If Husband were to pass away first, and his estate passes to his Wife, her estate is now worth $6 million – which is over the current estate tax exemption amount. Portability allows the Wife to obtain and use the unused portion of the Husband’s estate tax exemption when he passed away. He could have passed up to $5.34 million if he passes in 2014, however, he only passed $4 million. Thus, there is $1.34 million of his exemption unused. Portability allows the Wife to take that $1.34 million of unused exemption and add it to her exemption – thus, increasing her possible exemption in 2013 to $6.68 million. Thus, if she were to pass in 2014 with the same approximate estate of $6 million, she would have avoided the estate tax.

How to Claim Portability

In order for the surviving spouse to claim the unused portion of the deceased spouse’s estate tax exemption, the executor of the first spouse’s estate must timely file Form 706, the United States Estate Tax Return and elect portability. This form must be filed within 9 months after the first spouse’s date of death.Any time you are handling someone’s estate after they pass away, it is wise to consult with a probate attorney, such as the attorneys at The Law Office of Deborah N Arthur, in order to ensure that you are handling probate correctly and taking advantage of all considerations including the possibility of portability.Contact us at ; 703-658-6050 ;  or [email protected] blog is only for informational purposes. Please remember this is not intended as legal advice and does not create an attorney-client relationship. Every case is special and more information would be needed to provide you the best legal advice possible.

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