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F A L L 2 0 1 3
A significant advantage to electing
portability is that the entire estate on
the surviving spouse's death will receive
a step up in basis. Receiving a step up
in basis on the death of the surviving
spouse has the potential for reducing
income taxes when assets are sold
after the death of the surviving spouse.
Another advantage of portability and
leaving the entire estate to the surviving
spouse in a revocable trust, is that it
eliminates the exemption trust and the
need to prepare an income tax return
each year for the exemption trust.
There are situations in which
an exemption trust still should be
used on the death of the first spouse.
For example, if the couple's estate
will continue to grow and will likely
exceed the combined $10,500,000
exemption of both husband and wife,
then an exemption trust is likely to be
appropriate. Also, an exemption trust
may be appropriate to avoid increases
in property taxes as a result of changes
in ownership where the couple's real
property value exceeds their residence
and $1,000,000 of property tax value at
the date of the first spouse to die.
The use of an exemption trust is still
appropriate where there are concerns
of protecting assets from creditors, a
remarriage by the surviving spouse,
or concerns about management of
assets by the surviving spouse or other
beneficiaries. The exemption trust
must still be used to have the benefit
of the generation skipping transfer tax
exemption for both spouses.
As a result of the changes in the
estate and gift tax laws by the Act,
individuals and couples should review
and update their estate plans.