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Estate Taxes, Portability, and a bit of Good News!

Lately, the news has been full of potential changes in tax laws and regulations. One special area of attention is the estate tax exemption and other transfer of wealth opportunities. While the proposed changes focus on the reduction of the estate tax exemption and limitations on other lifetime transfers, there has not been any discussion regarding removing the portability election for estate tax exemption. That’s good news!

Estate tax exemption portability allows married spouses to “port” or transfer over unused estate tax exemption to the surviving spouse upon the death of the first spouse.  As of today, the estate portability election allows married taxpayers to combine their estate tax exemption to cover $23.4 million of asset value.

If the estate tax exemption is reduced to $6 million per person, as proposed in recent potential legislation, married spouses would still be able to shelter $12 million of asset value from the federal estate tax using the portability election.

The portability election is not difficult but does require an estate tax return with estimated values be filed within 9 ½ months of death. Special rules have been enacted to extend the filing period to 2 years after death if filed under specific regulations. The estate tax return filing can also be an important tool to assist in establishing step up basis on assets transferred at death.

We recommend you consider talking with your tax professional and attorney regarding the availability of the portability election should you or a loved one be faced with the difficult task of administering an estate. With the likely potential for the estate tax exemption decreasing, any exemption saved is more important now than ever.