You can’t take it with you

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Q. What does it mean to say the estate tax exemption is portable?
— Planning ahead

A. When you die, you can’t take your money with you, but estate tax law does give you a savings opportunity.

The federal estate and gift tax exemption amount — the amount you can give away during life or at death without incurring a federal transfer tax — is $5.45 million per person, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

She said the concept of portability was first put in place by the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010.

“Prior to the enactment of portability, if the first spouse to die failed to use his or her exemption, it was lost forever,” Romania said. “To ensure the exemption was utilized in full upon the death of the first spouse, the manner in which a husband and wife held title to their assets was important, as well as estate planning utilizing credit shelter or bypass trusts.”

With portability, when the first spouse dies, the surviving spouse may be able to preserve and utilize the deceased spouse’s unused exemption amount — known as the DSUE amount — for both lifetime and testamentary (upon death) gifts, Romania said.

Portability is only available at the federal level, not with respect to the New Jersey estate tax.

Romania said there are a number of requirements and restrictions governing the concept of portability.

“For example, upon the first spouse’s death, a complete and properly prepared federal estate tax return must be filed within nine months of the date of death plus any extensions,” she said. “Portability is also limited in that the surviving spouse can only use the unused exemption of the last deceased spouse.”

The surviving spouse does not lose this DSUE amount upon remarrying, Romania said. But if the new spouse dies, then the surviving spouse does lose the remaining DSUE of the first spouse, but gains the second spouse’s unused exemption amount.

“The surviving spouse’s use of the deceased spouse’s unused exemption amount, resulting from portability, is in addition to the surviving spouse’s own exemption amount,” Romania said. “Therefore, if the proper procedures are followed, with portability a married couple has a combined federal estate and gift tax exemption of $10.9 million.”

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This story was first posted in February 2016. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.