Doubling Your Estate Tax Exemption

Now that the portability provision of the new federal estate-tax law has been implemented, married couples can potentially double their estate tax exemption. A recent article discusses how to do just that.

Portability is a provision that allows one spouse to transfer his or her unused estate tax exemption to his or her surviving spouse. For 2013, the estate tax exemption is $5.25 million per person. Therefore, if the first-to-die spouse dies with an estate worth below $5.25 million, his or her unused estate tax exemption will pass to the surviving spouse. Therefore, the surviving spouse could potentially pass on a total of $10.5 million, tax free.

If you would like to take advantage of portability, you must fill out IRS form 706. This form must be returned to the IRS within nine months of the first spouse’s death. If the surviving spouse needs more time, he or she can file a Form 4768 within nine months of the first-to-die spouse’s death. Form 4768 will earn him or her a six-month extension during which to file form 706.

It is also important to beware of any potential complications that may arise when utilizing portability. For example, people often make mistakes when calculating their gross and net estate tax liability. It is wise to seek a professional to complete these calculations.

For information on how portability can benefit your estate plan, contact us at (626) 696-3145.

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