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Portability: Is It a Good Idea?

April 13, 2023

Diane Kotkin

When someone passes away, a Federal Estate Tax Return is not required to be filed unless the decedent’s gross estate exceeds their remaining federal estate tax exclusion. In 2023, for someone who has not used any exclusion during their lifetime, this amount would be $12.92 million. Maryland also has an estate tax and is currently capped at $5 million.

However, even if your wife’s gross estate does not exceed the require threshold to file, this does not mean filing an estate tax return may not be the best course of action. You may wish to file for portability.

Portability is the ability to for a surviving spouse to use the deceased spouse’s unused estate and gift tax exclusion after the deceased spouse’s death. Portability is not automatic; it must be elected on a completed estate tax return.

Filing for portability is always a good idea, even when the ported exemption may seem more than enough to eliminate estate taxes on the survivor’s estate. The current estate tax exemptions are set to “sunset” on December 31, 2025. Consequently, the exemption will be reduced by approximately 50% for any individual passing away in 2026 or later (estimated $6.2 million per individual/$12.4 million per married couple). So, even though you might not have an estate tax issue with the current elevated exemption amounts, you may pay estate tax in the future when the exemption amounts are cut in half. Filing for portability on your deceased wife’s estate now may eliminate estate tax upon your death or, at the very least, save a significant amount of money.

As always, seek the guidance of a qualified estate planning attorney to help you determine if an estate tax return should be filed and how the current tax laws may affect you.

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