New Portability Rules Affect Estate Planning

 President Obama signed the American Tax Relief Act (ATRA) of 2012 into law at the beginning of this year, causing many revisions to estate planning code that will affect retiring Boomers in large numbers. According to Forbes, “one of the key provisions of ATRA is to make permanent to so-called portability of the applicable exclusions amount between spouses.” The rules of portability greatly affect estate planning, according to Forbes, and should be considered with an estate-planning attorney. So what is portability? What does it do?

According to Forbes, the new laws regarding portability allow for the transfer of one spouse’s unused estate tax application exclusion to the other upon the death of the first spouse. This means that the surviving spouse can use this tax application exclusion for gift or estate tax purposes, rather than it going to waste if it hadn’t been used before the death of his or her spouse. “Any applicable exclusion amount of the first spouse to die that is used to reduce the estate tax liability of that spouse’s estate tax reduced the amount of the excess applicable exclusions amount that carries over to the surviving spouse in the form of ‘deceased spousal unused exclusion amount,’ or DSUE amount,” reports Forbes.

According to Kitces.com, this new provision will significantly impact the rules regarding estate planning for many years to come, and will affect different people differently based on their income. In some cases, according to Kitces.com, it may render the use of a bypass trust relatively useless, because of the costs associated with trust drafting and administration. By evoking the new portability rules, many people in lower tax brackets will be able to save when it comes to the necessity of having a trust in addition to a will and an estate plan. This is great news for a large majority of Americans.

If you or someone you know is in the beginning stages of estate planning, determining what type of plan is best for you is best undertaken with the assistance of a qualified attorney. Don’t go through it alone. Contact an experienced estate-planning lawyer today.