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Home >> Portability and Your Estate Plan – 3 Questions

Portability and Your Estate Plan – 3 Questions

April 14, 2014 by Robert Kulas. Leave a Comment

When it comes to estate planning and estate taxes, the idea of portability is an essential concept. Portability is, essentially, the ability to use the unused estate tax exemption that a deceased spouse leaves behind. To help you better understand the idea of portability and how it applies, let us take a look at three key issues you will need to become familiar with.

The Federal Estate Tax

Estate planning is all about looking at what you own and taking steps to prepare for how that property will transfer to others after you die. Your estate is simply the collection of assets and debts that you leave behind. If the value of your estate exceeds a specific amount, your estate will have to pay a certain portion of its value as a tax.

The Federal Estate Tax Exemption

The estate tax is a federal law, and one that comes with a specific exemption amount. When you leave behind an estate, the estate tax will only apply to that property if your estate is worth more than a specific amount. In 2013, the estate tax exemption amount was $5.25 million per individual. In 2014, the exemption amount is $5.34 million per individual. So, if you die in 2014 and leave behind an estate worth $5.33 million, your state will not have to pay any estate tax.

Estate Tax Exemption Portability

When married couples approach the question of estate taxes, they have to look beyond the individual exemption amount. Portability is the idea that you can take your spouse’s exemption limit and add it to your own. Through portability, married couples essentially have an estate tax exemption limit that is double the exemption for individuals. Here’s how it works.

Let’s say a husband died in 2013 leaving behind an estate worth $4 million. That $4 million was not subject to estate taxes because it was under the $5.25 million exemption limit that applied at the time.

Later this year, the surviving wife of the predeceased husband dies leaving behind an estate worth $6 million. Had the wife died as a single person she would’ve left behind an estate that was in excess of the $5.34 million exemption limit. However, because her husband had died before her, she can apply the unused portion of his exemption to her own estate tax exemption amount. So, her estate tax exemption limit would be $5.34 million plus the $1.25 million her husband didn’t use, giving her a total exemption amount of just about $6.6 million. Since the total size of her estate is $6 million, her estate will also not have to pay anything in estate taxes.

Filed Under: Estate Planning, Taxes Tagged With: estate tax

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"Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family."

Janice M
Client Review
August 25, 2020
    

Robert Kulas and staff made making a will an easy to understand process. They were very knowledgeable and attentive to my wishes. All my documents were provided in an organized binder which will be a great asset to my family. I would definitely recommend them.

Krissy L.
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I have worked with Mr. Kulas & staff before. And they are very professional. I am very satisfied with Mr. Kulas and his staff and give them the highest satisfaction and 5 star rating.

Leo C.
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Mr. Kulas and his staff have been extremely helpful & knowledgeable for the over 3 years we have been associated. They are easy to talk to and explain everything without feeling rushed. Very competent and professional.

Mildred W.
Client Review
August 25, 2020
    

I have known Robert Kulas for 20 years since I was co-executor for friends who had Mr. Kulas prepare a Trust for them. When I felt I needed a trust also, I came to him. I have always been completed satisfied with his work and that of his charming, competent staff.

Joan C.
Client Review
August 25, 2020
    

We began our estate plan process in 2004 (12 years ago) and have been pleased with the periodic reviews we have gone through and when changes have been needed the firm has been thorough and professional in making those changes.

L.G.K.
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