New Estate Tax Break

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