Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.
Kavesh Minor & Otis Estate Planning Lawyers

One of the key provisions of ATRA is to make permanent the so-called portability of the applicable exclusion amount between spouses, which was enacted by Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

Terms of art can be interesting, to say the least. You know, those arcane words with special meaning only to those in the daily business of using them. Take “portability,” for example. Outside of the American Tax Relief Act of 2012 (ATRA), this word may appropriately describe the movable nature of such things as jobsite restroom facilities or “boom boxes.”

While the concept of “portability” is not entirely new, it is a fairly important tax concept for all married couples.

In fact, a recent Forbes article titled “Estate Tax Portability – New Paradigm For Estate Planning” is a primer of sorts for couples still unfamiliar with the concept now become law. Practically speaking, with the advent of “portability,” most married persons do not need to worry about maximizing the estate/gift tax exemption of each spouse. Formerly, couples had to craft special trusts and other devices to ensure the opportunity to shelter their combined estate/gift tax exemption amount.

Under ATRA the estate/gift tax exemption amount for each spouse is “portable” between spouses. Consequently, not only can the surviving spouse inherit all of the couple’s assets, but can inherit the exemption amount attributed to the deceased spouse. This “portability” benefit is not automatic and what appears simple can become complex.

The surviving spouse is required to file the correct tax forms (i.e. IRS Form 706) to claim the unused estate/gift tax exemption of the deceased spouse. Fail to do the paperwork and you fail to get the benefit of portability.

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