The benefit of electing for portability is to minimize or eliminate federal estate taxes for a married couple. The most obvious benefit is $10 million worth of estate tax exclusion, which is about three times higher than the previous high of $3.5 million in 2009. The amount is so high that many decedents could make substantial gifts or bequests, and still leave a high amount of portability to the surviving spouse.
San Francisco Lawyers, Identifying and Securing Estate Tax Exclusions
Current federal law gives each taxpayer a $5.12 million exclusion from the federal estate tax. If someone dies and their total estate, including gifts made during their lifetime, does not exceed $5.12 million, their estate does not owe federal estate taxes. Portability allows the surviving spouse to use the exclusion that the first spouse to die did not use. If the first spouse to die gave all of his or her estate to the surviving spouse, the surviving spouse will wind up with a maximum $10 million exclusion.
The surviving spouse must elect to use portability by filing an estate tax return for the estate of the first spouse to die. The estate tax return must include the election for portability, which is probably accomplished by simply checking a box. However, failing to file the return will cancel portability for the first spouse to die. Estate tax returns are complicated and CPAs will charge thousands of dollars to prepare them. Another problem is that portability applies only to estates of those who died after Jan. 1, 2011. Estates of decedents who died before that date are subject to the old law, which doesn’t allow portability.
Estate Tax Lawyers Serving the Bay Area and Southern California
To discuss how to qualify for estate tax exclusions, please call 415-441-8669 or contact our San Francisco attorneys online via e-mail to schedule a free initial consultation. We are happy to schedule appointments at your convenience.