New York Estate Planning & Elder Law Blog
PORTABILITY
In 2011 Congress revamped the estate and gift tax laws and legislated that the federal estate and gift tax exclusion amount was $5 million. This amount is annually adjusted for inflation; the 2015 maximum is $5.43 million. Any estate values less than this amount are excluded from estate and gift tax liability. So, for example, if a husband passes away and leaves $4 million to his wife, the wife has an additional $1.43 million that she carried over to her own estate, as well as the standard $5 million that she is entitled to for her own estate if she also passed away in 2015 before any federal estate tax liability is incurred. Consequently, under the simple example provided, the wife is entitled to $6.86 million in exemptions before incurring any federal estate tax liability. If the surviving spouse remarries, he/she still retains the right to the portability of the unused estate tax. The portability is only effected if the second spouse of the surviving spouse also pre-deceases the original surviving spouse then the portability from the first spouse is extinguished. The idea and principles of estate tax portability do not apply to generation skipping transfer taxes, which is when a grandparent leaves money to his or her grandchildren.
IRS ALLOWS A DO OVER