AGS Wealth Transfer Flow ------------------------- Estate Law Summary and Portability The 2014 gift and estate tax exemption is $5,340,000, as set by the American Taxpayer Relief Act of 2012. The top federal tax rate is 40%. As of Aug, 2013, four states have an estate tax, eleven states have a credit estate tax, seven states have an inheritance tax, and NJ and MD (already counted) have both a credit estate tax and an inheritance tax. The amounts and/or rates of the state taxes vary from state to state. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 introduced a new estate-planning concept – exemption portability. Portability means the estate of a deceased spouse can transfer to the surviving spouse any portion of the federal estate tax exemption that it does not use. The surviving spouse can then add that amount to the exemption he or she is otherwise entitled to, increasing the total amount that can pass to heirs tax free. Portability makes it easier for married couples to minimize the potential impact of gift and estate tax. To use the exemption portability, the estate of the first spouse to die must elect to use portability on the estate tax return. That means that the estate of the first spouse to die must file an estate tax return to use portability even if the estate of that spouse is not otherwise required to file an estate tax return.Exemption portability is available only from the last deceased spouse. The surviving spouse loses the exemption of the first spouse to die if the surviving spouse remarries and is predeceased by the second spouse. As an example, if the surviving spouse survives Spouse 1, the surviving spouse can use Spouse 1’s unused exemption even if the surviving spouse marries Spouse 2. However, if Spouse 2 also predeceases the surviving spouse, the surviving spouse cannot use the exemption of Spouse 1 any longer. However, the surviving spouse can then use the unused exemption of Spouse 2. The portability feature applies only to the gift and estate tax. It does not apply to the generation-skipping transfer (GST) tax. Without a trust, any unused GST tax exemption of the first spouse to die will be lost. Let us help you and with your family plan for the transference of wealth in the most judicious, tax efficient manner. Telephone us at 1-610-724-2461
Posted on: Tue, 20 May 2014 02:41:55 +0000
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