Every taxpayer is entitled to the utilization of an estate tax exclusion or credit. This is the amount that can be transferred before the tax would be applied.
This blog post is being written late in 2015. For the remainder of this year, the estate tax exclusion is $5.43 million. There can be annual adjustments to account for inflation, and the adjustment for 2016 has recently been announced by the Internal Revenue Service. The exclusion will go up by $20,000 next year, bringing it up to $5.45 million.
The Matter of Portability
There is a term that is used by legal/tax specialists called portability. In an estate planning context, this term is used to describe the ability of a surviving spouse to use the exclusion that was allotted to his or her deceased spouse.
Traditionally, the estate tax exclusion was not portable between spouses. However, at the end of 2010, the estate tax was made portable for 2011 and 2012 via legislative mandate.
At the end of 2012, a piece of legislation that is now called the American Taxpayer Relief Act of 2012 was passed. A portion of this measure made the portability of the estate tax exclusion permanent. As a result, your surviving spouse would have two exclusions to utilize if you pass away first.
However, a representative of an estate must opt for portability through the filing of Internal Revenue Service Form 706. This form should be filed within nine months of the passing of the decedent in question, but it is possible to petition the IRS to grant a six-month extension if more time is needed.
Marital Deduction
We should point out the fact that there is an unlimited marital estate tax deduction. You can transfer unlimited assets to your spouse tax-free without using any of your estate tax exclusion, as long as you and your spouse are American citizens.
Dig Deeper
In this brief blog post we have looked at the estate tax and the matter of portability between spouses. Since the estate tax carries a maximum rate of 40 percent, it can have a significant negative impact on your legacy, so you should understand the tax thoroughly.
We have prepared an in-depth special report that will bring you up to speed with regard to the estate tax and the strategies that can be implemented to ease the burden if you are faced with exposure. This comprehensive report is being offered to our readers on a complimentary basis at the present time, and you can click the following link to obtain access to your copy: Free Estate Tax Report.
Take Action
If you would like to discuss your estate planning objectives with a licensed professional, feel free to contact us through the following page to set up a consultation: Grand Forks ND Estate Planning Attorneys.
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