Portable Credits May Hurt Estate Planners

Estate planners are concerned that the new tax bill is going to hurt their practices. A key reason is the portability of exemptions. Historically, wealthy married couples needed good legal advice to utilize the full value of both their estate tax exemptions, which typically required the establishment of a complex trust.

Now clients will not need this tax planning because the tax bill has a “portable” exemption, which allows any unused portion of the deceased spouse’s $5 million exemption to automatically go to the surviving spouse’s future estate.  Estate planners will have to rethink their strategies and do a better job at asset protection.

Some estate planners even joke about starting trafficking in portability credits. David Diamond of Napa Valley jokes, “Maybe I should retire from the practice of law, get ordained so I can perform marriages, and start a match-making service where I pair up and marry destitute seniors in nursing homes to wealthy unmarried individuals. What’s a $5 million exemption worth? At least $1,750,000 in today’s dollars. Even taking life expectancy into account and discounting to present value, a fee of $50,000 to $100,000 doesn’t seem unreasonable for this service. Putting a few marriages together per year would sure beat sweating out 1,500 billable hours.”

Jerry Cooper, Advisors Predict Obama Tax Deal Will Hurt Trust Business, The Trust Advisor Blog, Dec. 12, 2010.