Tax Relief Act
The new estate tax laws which took effect in 2011 include an option for spouses to combine their tax exemptions so neither spouse loses the full amount of the exemption when spouses passes away before the other. In years past, each spouse’s unused exemption would be lost if one spouse didn’t use all of it. The Tax Relief Act of 2010 allows a transfer of the unused portion of the tax exemption from one spouse to the other. The ability to make this transfer is referred to as “portability”.
A spouse is entitled to an exemption that allows him to gift during his life and at his death, a total of five million dollars. Each spouse has his/her own exemption. If a husband gives away 1 million dollars during his life to his family and charities and then leaves his entire estate to his wife when he dies, he has essentially four million dollars of unused tax exemption. (When you leave your estate to your spouse, it is not considered a “gift” because your spouse is part owner of the estate.) Rather than lose that four million dollar tax exemption, it now is added to the wife’s five million dollar tax exemption so her total would nine million dollars when she dies.
“Portability” does not do away with the need to properly plan your estate and use trusts to maximize tax deductions and protect assets from creditors and predators.
Get Legal Help
The Tax Relief Act of 2010 is only valid for two years and no one knows what changes will be made once it expires. Contact experienced Estate Planning Attorney Elga Goodman today to learn how to take advantage of all the new estate tax laws. Call us today at 973-841-5111.