Taxation & Estate Planning

Greenville Estate Attorney: ?The Estate Tax Exemption to Become Portable??

By Christopher L. Miller

Lately I have found myself fascinated by the recent repeal of the federal estate tax and all of its consequences, intended or otherwise. Equally fascinating are the proposals that have been made by members of Congress to reinstate the estate tax.

One such proposal is to ressurect the estate tax for 2010 at 2009 levels, and to make the federal estate tax exemption portable between spouses. This is an interesting proposal in that theoretically this would eliminate the need for a credit shelter trust to accomplish estate tax planning for a married couple. In a typical planning scenario, the credit shelter trust is funded by assets owned by the first-to-die spouse and is funded up to the exemption amount, and all other assets are placed into a qualified terminable interest property (QTIP) trust for the sole benefit of the surviving spouse. This is done because if all the assets of the first-to-die spouse are transferred to the surviving spouse, the first-to-die spouse’s exemption amount is totally wasted, and a much larger estate tax becomes due at the end of the surviving spouse’s lifetime.     

The portability of the exemption would allow whatever exemption amount that is unused in the first-to-die spouse’s estate to be transferred to the surviving spouse’s estate.  Wouldn’t that be great? The proponents of portability say that this would eliminate the need for the credit shelter trust, thus reducing complexity and the financial burden of estate planning. Good intentions of course, but where again does that road paved with good intentions lead?

Experienced estate planners can instantly recognize the complexities that exemption portability would create.  Number one, what about multiple marriages? (more…)

Full post as published by Res Publicae - The New York Estates Blog on January 27, 2010 (boomark / email).