Wealthy Spouses Shouldn’t Rely on New Estate Tax Portability

The portability clause in the new tax bill may not be as special as it appears at first glance, and wealthy spouses shouldn’t rely on it for several reasons:

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    • The portability clause is only in effect for two years.
    • Relying on portability, rather than setting up a bypass trust, does nothing to address asset appreciation. If a trusts holds the $5 million exemption, the beneficiary receives the $5 million plus appreciation free of estate taxes.
    • Relying on portability alone does not afford the credit protection that a trust can provide.

Because portability is merely a safety net, very wealthy spouses should continue with traditional, sophisticated estate planning.

See Pitfalls of New Estate Tax Portability, Private Wealth, Jan. 20, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) and Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this to my attention.