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New rules change estate planning for many couples

Florida residents may be interested in recent tax law changes that have simplified estate planning for married couples with between $5 million and $10 million in assets. Congress changed the portability rules with regard to estate planning. The change was temporarily made by Congress in 2011 and then became permanent in the American Taxpayer Relief Act of 2012.

Portability describes a couple's ability to transfer an individual's $5.34 million tax-exempt assets to the surviving spouse upon the first spouse's death. Couples have always been able to transfer unlimited amounts of assets between each other upon a spouse's death. However, under the previous law, the first spouse's exemption disappeared with his or her death. That meant that upon the second spouse's death, all assets that exceeded the spouse's $5.34 million exemption were subject to estate taxes.

Now, the first spouse's exemption can be transferred to the second spouse, giving the second spouse a $10.68 million exemption upon his or her death. Estate planning attorneys had previously used a variety of trusts to get around the lack of portability. Those trusts may no longer be necessary in many cases, while other couples may still take advantage of estate planning tools to resolve unique situations.

An estate planning attorney could advise a couple on how the new portability rules affect them. If their assets are worth less than $10 million, they may not need a trust or any other planning tools. However, if their estate exceeds $10 million or if they have unique circumstances or goals for their estate, they may benefit from advanced planning. An attorney could review their estate and recommend which planning tools may be most appropriate.

Source: Forbes, "Estate Planning For The 99%", Deborah L. Jacobs, January 19, 2014

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