Understanding the Complexities of Portability in Idaho After ATRA

Many people are still scramblingto come to terms with the tax changes enacted at the end of last year with theAmerican Taxpayer Relief Act (ATRA). Among the changes involved, some estateplanning techniques may need more clarity – so it is with “portability.”

A recent Q&A in The Wall Street Journal reveals that the“Gift-Tax Exclusion Isn't 'Portable'.” Consequently,there are some important lessons to draw from this.

The concept of “portability”first arose in 2011. Essentially, “portability” is a feature of your unifiedcredit. The unified credit is a fancy term for the amount you can exclude fromtaxation either by way of gifting during your lifetime or through bequestsafter death. Under current tax law, you get one unified amount ($5.25 millionunder current law) to use either in life or in death. If unused by one spouseat death, the amount becomes “portable” in that such spouse can pass any unusedcredit to their surviving spouse in much the same way they pass their assets.

This is not the same as your annual gift tax exclusion, which is theamount you or anyone can give during the course of any given year withouttaxation or effect upon your lifetimegift tax exclusion (aka unified credit). Your annual gift tax exclusion is not“portable.”

Once we get used to it,“portability” may be a real time-saver and could simplify many estate plans. Inthe interim, however, it is strange in its novelty compared totraditionally-accepted estate planning techniques.

Even if you are not susceptible to the estate tax atits current level, you might want to investigate how “portability” may impactyour own estate planning. Note: the benefits of “portability” are not automaticand require some very specific steps to enjoy it.

At IdahoEstate Planning we are the experts you need to know and trust.Work with us and we'll put together a plan that works for you and your lovedones. Remember, goodplanning is no accident.


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