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 within a profession or trade. 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 (i.e., "johnny-on-the-spot") or “boom boxes.”
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 amounts for each spouse is “portable” between spouses. Consequently, not only can the surviving spouse inherit all of the couple’s assets, but also can inherit the exemption amount attributed to the deceased spouse.
Danger! This “portability” benefit is not automatic and what appears simple can become rather 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 file the proper paperwork and you fail to get the benefit of portability.
It is that simple (or complex).
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.For more information about estate planning in Overland Park, KS, and to download free tools to help you organize your estate, visit my estate planning website.
Reference: Forbes (July 20, 2013) “Estate Tax Portability - New Paradigm For Estate Planning”