Understanding the Portability of the Estate Tax Exemption

Many people make estate tax avoidance a priority. This makes sense considering how costly the estate tax can be if the total value of an estate exceeds the allowed exemption amount. Fortunately, there have been laws introduced to help people plan for estate taxes. For instance, did you know that in 2010 the portability of the estate tax exemption was first introduced? This happened through President Obama signing the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (TRUIRJCA) into law on December 17, 2010.

What Is The Portability of the Estate Tax Exemption?

Essentially, the portability of the exemption allowed any unused exemption from the death of the first spouse to be added to the exemption of the second spouse upon his or her death. It can be important to note, however, that portability of the estate tax exemption is only available to married couples. Portability can help prevent the estate of the second spouse from incurring exorbitant estate taxes.

The introduction of portability regarding the estate tax exemption made a significant impact on the world of estate planning. Effectively, it nearly eliminated the need to create credit shelter trusts funded at the death of the first spouse with the exemption amount. Credit shelter trusts, however, may still be useful. Some states have local estate taxes as well. The creation of a credit shelter trust may be beneficial in these cases unless that state’s law also allows portability. Some state laws permit portability while others do not. Furthermore, it may be important to be aware of the fact that, in order to receive the benefit of the portability exemption, an estate tax return must be filed, even if no tax is due and otherwise not required, so that the election can be made. 

Contact The Law Offices of Clifford M. Cohen Today!

To learn more about how to avoid estate taxes, please call the Law Offices of Clifford M. Cohen at (202) 895-2799 to schedule a time to meet.