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Lauren on the Law

Portability

Posted by Lauren Rios | Mar 05, 2019 | 0 Comments

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Many clients seek guidance from an estate planning attorney because they want to avoid "Death Taxes," which are federal taxes imposed on an estate after a person dies. What many people don't realize is that few estates will subject to federal estate taxes due to recent changes in tax laws. In December 2017, President Trump signed into law new tax reform that changed how much estates can shelter from federal estate taxes. Under the current law, the federal estate tax exemption amount is $11.4 million per person. What that means is if your estate falls below $11.18 million, your estate will not be subject to federal estate taxes. There is one caveat--this exclusion will sunset on December 21, 2025 at which time the federal estate tax exemption amount will revert back to 2017 levels (which is approximately $5.5 million per person). 

For an estate that could exceed the current federal estate tax exemption, a relatively new concept called "portability" could provide some flexibility. Portability gives a surviving spouse the option to "port" or transfer a deceased spouse's unused estate tax exemption amount and tack it onto their own exemption amount. Thus, assuming the deceased spouse did not make any lifetime gifts or otherwise use any portion of their federal exemption amount during their lifetime, the surviving spouse could transfer the deceased spouse's $11.4 million resulting in the surviving spouse being able to shelter up to $22.8 million at his/her death. To claim portability, an estate tax return must be filed within two years of the death of the first spouse, even if no tax is due. It should be noted, again, that the ability for a surviving spouse to shelter up to $22.8 million dollars is allowed only until December 31, 2025, unless extended by law. 

If you believe your estate could be subject to federal estate taxes, and you would like to discuss the option of portability, contact out law office today. 

About the Author

Lauren Rios

Attorney Lauren Rios established her estate planning process on the philosophy that everyday people deserve access to the exemplary services of a big firm, but with the personal touch of a smaller firm. This belief is reflected in her delivery provided to her clients in the Bay Area.

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