Here’s another reason to look at your pre-2013 estate planning documents – Portability. 

 Portability essentially means that a married couple’s estate will get the benefit of having up to $10,680,000 of assets pass free of federal estate taxes when they die.  That is a HUGE change in the law.  An extra bonus for Texas citizens – Texas does not have a state Estate tax.

 Portability became permanent in The American Taxpayer Relief Act of 2012.    Each person has a lifetime amount that can be given by gift or inheritance  – the amount this year is $5,340,000.

 When a person dies, then the exemption amount that is unused (referred to by the acronym DSUE – Deceased Spouse Unused Exclusion) can be passed along to his or her spouse.  To have the portability apply, the decedent’s estate has to file a tax return within 9 months and make an election.  Quick example:  if the decedent’s estate used $2 million of the exemption, that means the surviving spouse would have a total exemption of $8,680,000.00.  

However, the DSEU amount is only for the most recent deceased spouse.  If the surviving spouse remarries, he or she may lose the DSEU amount.

  Why should this be of concern for pre-2013 estate planning documents?  Because tax planning before 2013 could not presume that portability would last.  Many wills provided for the exempt amount to go into a Trust so it was out of the surviving spouse’s estate for tax purposes.   That may add an unneeded layer of complexity –with the resultant accounting, lawyer and investment fees that go with it.

 If you need a review of your estate planning documents, give us a call.