Prior to 2011, if a person passed away with less than the amount of estate exclusion amount any unused portion of the exemption was lost. Starting in 2011, Congress allowed those people who passed away with less than the estate exemption amount to pass their unused portion of the exemption to their surviving spouse. This generally eliminated the need to set up “by pass” or “spousal” trusts to preserve the taxpayers unused estate exemption amount (a common technique among estate attorneys). Unfortunately, since the law had a sunset (expired at the end of 2012), most planning did not leverage this provision of the law.
The Act corrects this issue and makes this provision permanent for those dying in 2013 and after. This may eliminate some of the common estate planning structures used today.
If you have any questions regarding the impact of portability on your specific situation or estate planning strategies, please do not hesitate to contact us.