Is Portability Really Here to Stay?

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Although the new law has been hailed as a welcome relief from the old rules, it still can be deep water. Consider consulting a reliable estate-tax pro.

With budget uncertainty over our heads, it’s nice to know there are some laws that are (supposedly) set in stone. The American Taxpayer Relief Act of 2012 (ATRA) has allowed us to breathe a bit easier; however, many people still don’t trust any tax law claimed to be “set in stone” by the Government.

When it comes to making estate plans, certainty is an essential. Any uncertainty can wreak havoc on even the most carefully crafted plans. One popular “permanent” part of estate planning under ATRA is “portability.” Is it here to stay and can we trust it?

“Portability,” as you may well know, is the new ability of a spouse to pass their unused unified gift tax lifetime exemption and/or estate tax exemption on to their surviving spouse. It grew out of budget deals and then was made “permanent” under ATRA, also known as the bridge over the Fiscal Cliff.

As a questioner over in a recent Wall Street Journal Q&A (“Is Estate-Tax Portability Permanent?”) pointed out, estate tax “portability” is a great option but an act of Congress could just as easily undo it. What then?

The general consensus is that portability is probably here to stay and for a multitude of reasons. Assuming that remains true, the key to portability is to separate myth from reality. The first myth: portability is not automatic? The first reality: it can be rather complex, especially in terms of unintended consequences. For example, what happens when the surviving spouse remarries?

For the time being, perhaps you can breathe easier as to portability. The larger question, however, is what do you and your spouse hope to achieve through your estate plan from both tax and non-tax perspectives?

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Reference: The Wall Street Journal (March 31, 2013) “Is Estate-Tax Portability Permanent?

Categories: Estate Planning