Yes, portability is one of many tax-law provisions scheduled to expire at the end of
2012. But Congress appears likely to extend it beyond this year. Although many
estate-tax issues are highly controversial, this one enjoys bipartisan support.
You never really hear about it when Congress is in agreement – it’s not newsworthy (but it should be after the past few years) and doesn’t add up to edgy election year politics – but some
neat things come out of those silent agreements. Estate planners may be able to
keep stock in “portability,” an estate tax provision that is likely to survive
year’s end (or else be resurrected thereafter).
We’re still waiting for an official word, but by all accounts “Estate-Tax 'Portability' [is] Likely to Stay” (The Wall Street Journal). As regular readers know, the concept of portability came out of budget deals two years ago and is one more provision set to expire as part of the so-called “fiscal
Portability allows married partners, who already enjoy special
rights to exchange wealth between themselves tax-free at the passing of the
first, to pass on their unified estate/gift tax exemptions too. Without portability,
a surviving spouse may be required to pay estate taxes on the couple’s combined
estate value, if the first spouse to die did not properly apply their
exemption. A marital trust was the usual strategy employed to break this vicious
predicament. Under current law, though, the exemption is now portable (so long as the estate tax
return is filed on the passing of the first to die); so the surviving spouse
can apply both exemptions to the final estate.
It’s a powerful strategy. Under current law, this means that a surviving spouse can pass a whopping $10.2 million in estate value to their heirs, estate-tax-free.
Both this generous estate tax exemption and portability itself are
set to expire at the end of the year. Though pundits predict that portability is here to stay, no one can honestly say they know what Congress will do. We shall see.
Reference: The Wall Street Journal (November 4, 2012) “Estate-Tax 'Portability' Likely to Stay”