In estate planning, “portability” refers to the ability to transfer a deceased spouse’s unused federal estate tax exemption to the surviving spouse. This can be useful for couples who have not fully utilized their individual exemptions and want to ensure that as much of their combined estate as possible is protected from estate taxes.
Under current law, the federal estate tax exemption is $11.7 million per individual. This means that individuals can leave up to $11.7 million to their heirs without paying federal estate taxes. If a couple has a combined estate that is worth less than $23.4 million (the combined exemptions for both spouses), they may not need to utilize the portability provision. However, if their estate is worth more than $23.4 million, they may want to consider using the portability provision to ensure that as much of their estate as possible is protected from estate taxes.
To take advantage of the portability provision, the surviving spouse must file an estate tax return within nine months of the first spouse’s death, even if no estate tax is owed. This will allow the surviving spouse to claim any unused portion of the deceased spouse’s exemption and apply it to their own estate.
It is important to note that the portability provision is only available for federal estate taxes, and does not apply to state estate taxes, which may have different exemptions and rules. If you are considering using the portability provision in your estate plan, it is a good idea to consult with an attorney who can help you understand your options and ensure that your estate plan meets your needs and complies with applicable laws.