Portability Under the 2010 Tax Law

Under the 2010 tax law, individuals can transfer up to $5 million tax free during life or at death; taxpayers have until 2012 to take advantage of this tax break. Starting in 2011, a surviving spouse can acquire a deceased spouse’s unused exclusion amount (known as portability). A list of portability issues couples should consider is below:

• Portability allows a couple to transfer up to $10 million tax-free.
• The executor of the deceased spouse’s estate must transfer the remaining exclusion to the surviving spouse and file an estate tax return upon the deceased spouse’s death for the surviving spouse to gain the right to portability.
• The executor must file the return nine months following the deceased spouse’s death or the surviving spouse loses the right to portability (a six month extension is allowed, however.)
• Couples can engage in gift-splitting and give more to their children, tax-free. These tax-free gifts will, however, reduce the tax-free amount available at death.
• Couples can share their individual $5 million exclusion through lifetime gifts and bequests.

See Deborah L. Jacobs, How to Use the New Tax Break for Married Couples, Forbes, Aug. 21, 2011.