Dear Liza: It is my understanding that in order to preserve
the "portability exemption" a surviving spouse must file an estate tax
return (706), which would not be required otherwise. It seems that 706
involves quite a bit of work and additional expenses. Do you think it's
worth the effort? Surviving spouses of those who died in 2011
and 2012 have that decision to make. The problem is, there's not an easy
answer. For those who don't know what the question is, here's a quick
summary: Current estate tax law allows a surviving spouse to use any
part of the $5 million exclusion from the estate tax that was available
to their deceased spouse but not used by that spouse. For example, if
your spouse died in 2011, and their part of the estate was $1 million,
you could use that extra $4 million dollars of unused exclusion to
further reduce any estate tax due at your death. Your spouse's exclusion
would be portable to you. Except. There's always an except. And this time there are couple of them, and they're all pretty big:
In the end, you have to decide whether the time and cost involved are
worth the potential tax savings down the road. For some people it is;
for many, it isn't.
View more from Ask Liza: Everyday Estate Planning.
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