Great Article on Portability: Estate Planning for the 99%

This is a fantastic article by Deborah L. Jacobs that discusses several of the current, hot-button issues in estate planning.   Specifically, Ms. Jacobs discusses issues like portability and it’s effect on estate planning.

She describes portability as:

Despite its wonky name (which mind you does not actually appear in the tax code so don’t blame Congress for this particular jargon), portability solved a pressing problem and had all the hallmarks of a consumer-friendly new rule for the 99%. In a nutshell, the law made it possible for widows and widowers to carry over the estate tax exemption of the spouse who died most recently and add it to their own. The tax law refers to the sum carried over as the “deceased spousal unused exclusion amount.” In common parlance it has become known by the short-hand, “the DSUE amount.”

Many estate planning attorneys still believe that trusts (specially bypass trusts) still must be created even with portability as a reality in our current system.  Ms. Jacobs quotes Thomas W. Abendroth, a lawyer with Schiff Hardin in Chicago, as saying the reasons we still need bypass trusts are as follows:

• Protect against disgruntled spouses, creditors and others who may sue your heirs

• Prevent the evil stepmother or stepfather from cutting your children out

• Preserve the exclusion, in a remarriage in case the new spouse dies first

• Make your grandchildren rich. Portability does not apply to the generation-skipping transfer tax that is levied, on top of any estate tax, to transfers to grandchildren or more remote descendants of more than $5.34 million. You can apply all or part of your exclusion from that tax to the bypass trust and include grandchildren as beneficiaries.

• Reduce state estate tax if you live in a state that has one. Nineteen states and the District of Columbia have a separate estate tax, and so far only one (Hawaii) has portability provisions. (See “Where Not To Die in 2014.”)

In New Jersey, the exemption is still only $675,000.00, which still means that many of the common estate planning techniques should be used to protect your assets, as portability applies from a Federal perspective, but it does NOT apply to New Jersey estate taxes (yet).  However, Mr. Abendroth’s points are well taken in New York.

If you need a will, a trust, or if you’d like to learn more about how we can protect your estate, please contact Alec Borenstein, Esq., at alec@bmcestateplanning.com or use the form on the right.