Estate Tax Exclusion Portability: Policy to Planning Ideas

 By Ashley Alderman

The introduction of the concept of “portability” in the Tax Relief, Unemployment insurance Reauthorization, and Job Creation Act of 2010 was the first time that a married couple could potentially take advantage of both spouses’ estate tax applicable exclusion amounts without engaging in complex estate planning and proper titling of assets.  Despite the significant opportunity, the law enacted by Congress left many holes in the application of portability, most importantly for 2012 planning, whether gifts by a surviving spouse used the Deceased Spousal Unused Exclusion Amount (DSUEA) first or whether they used the surviving spouse’s own basic exclusion amount first in the calculation of gift tax owed.   Additionally, the concept of portability will sunset with the Act on December 31, 2012.  Without Congressional action, portability of the estate tax exclusion amount will not exist in the estate tax law on January 1, 2013.

In June of 2012, the IRS and Treasury finally issued regulations on portability which clarified many of the open-ended questions from the statute.  These regulations are extremely taxpayer friendly, and the use of portability may provide a planning opportunity for practitioners, but reliance on portability is not without significant risks.

My article from the October 2012 issue of Estate Planning discusses some of the following issues regarding portability:

  • Policy of treating married taxpayers as a single unit;
  • Requirements to elect portability and report DSUEA;
  • Computation of DSUEA;
  • Coordination of DSUEA with gift tax liability;
  • Advantages and planning opportunities;
  • Disadvantages and planning risks; and
  • Future of portability.
Explore posts in the same categories: Estate Administration, Estate Planning, Estate Tax, Gift Taxes, Tax, Tax Returns

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