Exemptions for Estate Taxes

Due to a provision allowing individuals to use their deceased spouses' exemption credits, wealthy individuals will have an easier time cutting their estate taxes. There are current exemption amounts for estate taxes for everyone. In the past, couples had to set up special trusts to ensure specific division of assets. This new provision is meant to help those who didn't implement proper planning before the death of one spouse. However, it shouldn't be counted on as a substitute for pre-planned arrangements. The current exemption covers gifts after death and those made while alive. Since threshold amounts are subject to change from one year to the next, it's best to speak with a qualified agent to discuss the current threshold amount. There are several important factors to consider.


Portability is used as a safety measure for couples who utilized exemptions without wills. Having wills with bypass trusts or other strategic inclusions can be costly. Unless married couples do extensive planning, they could lose one exemption benefit. The portability option is best for taxpayers who have estates that are worth less than $7 million. This applies to couples whose main assets are retirement plans and real estate. Taxpayers whose estates exceed $10 million benefit from bypass trusts.

Bypass Trusts

After portability expires, the estate tax percentage will increase. Taxpayers try to preserve their assets before this happens. To do this, they use credit-shelter or bypass trusts. These trusts preserve exemption amounts upon death. In addition to this, the remainder of assets are passed on to the surviving spouse. If the spouse is a citizen of the United States, gifts from a deceased spouse under this provision are not taxed under IRS rules. The exemption amount is placed in a trust for the surviving spouse in this trust. If both spouses died, the named heirs would receive the trust funds without tax penalties.

Portable Amounts

It's important to know the consequences of dissolving bypass trusts to use portability. Congress may not extend it in the future. If it is extended, possible alterations of the tax thresholds could change the carryover amount. This could change the estate's exemption considerably.

Remarrying Consequences

It's important for widowers or widows considering remarrying that portability is granted only to the last deceased spouse. States don't usually allow portability of exemptions for estate taxes. Some states may have thresholds that are lower than the government's.


An option for preserving portability in the event it expires is to give away the unused amount as a gift. This could help people preserve their exemption amount. In order to obtain unused exemption funds from a deceased spouse, the executor must submit a form to grant the exemption to the surviving spouse. Returns for estate taxes are required to be filed nine months after death. However, there is a six-month extension that is granted to those who need it.