Why the value of exemption portability is limited
Abstract: One notable change to estate tax law is the “portability” of gift and estate tax exemptions. Now, when one spouse dies, the surviving spouse can take advantage of the deceased spouse’s unused exemption. This means avoiding gift and estate taxes and achieving a stepped-up basis for one’s children with minimal estate planning. But this article shows that, in most instances, portability is no substitute for traditional estate planning. Besides several other reasons discussed, portability doesn’t protect assets from creditors or avoid taxes on appreciation. But a sidebar notes that, if one chooses portability, an executor must make an election on a timely filed estate tax return.