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Using Portability in Estate Planning


Woman hiking image - Pleasanton estate planning attorney discusses portability of a deceased spouse's unused estate tax exemption.
Pleasanton estate planning attorney discusses portability of a deceased spouse's unused estate tax exemption.

The word “estate” in planning doesn’t have anything to do with the size of your home. It simply refers to a person’s assets: their home, bank accounts, a second home, investment accounts, cars, anything you’ve got.


Although the federal estate tax currently impacts very few people today (a person would have to have assets that total more than $11.7 million before they have to worry about the federal estate tax) the exemption is likely to be lowered in the coming years.


Therefore, when one spouse dies, it is generally recommended that the surviving spouse consider filing a Federal Estate Tax return to elect "portability" of their deceased spouse's unused estate tax exemption. That is because when the first spouse dies, they may use a portion of the Federal Estate Tax exemption, but there’s usually a sizeable portion available for the surviving spouse.


If IRS Form 706 (the estate tax return) is filed in a timely manner, the surviving spouse can "port over" or protect the remaining amount of Federal Estate Tax exemption that the deceased spouse had not used. This return needs to be filed within nine months of the date of death, although the surviving spouse can obtain an extension.


No tax will be owed, since the return is filed merely for reporting purposes. The assets in the entire estate must be reported, including everything the person owned. That may be cash, securities, real estate, insurance, trusts, annuities, business interests, and other assets. Appraisals and significant documentation are not usually required on a return just for portability purposes, although it may be very helpful for the purpose of establishing cost basis for the future.


Completing an IRS Form 706 for portability is not a complex task, but it should be done in conjunction with settling the estate, which should be done with the help of an attorney or tax advisor to be sure any tax issues are dealt with properly.



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