Married with Millions? Look Into The New IRS “Portability” Tax Break.

wedding-559422_960_720If you’re looking for a smarter, more efficient way to pass on wealth to heirs, the IRS has created it. According to The Wall Street Journal, “The Internal Revenue Service recently released final rules detailing a generous estate- and gift-tax break for married couples who don’t set up expensive trusts before death. This exemption, which is indexed for inflation, is $5.43 million per individual in 2015. This year, only a tiny fraction of estates—about 4,000—are expected to owe taxes, according the data from the Tax Policy Center, a nonpartisan group in Washington.” 

Originally, trusts were set up to shelter assets being passed to heirs from taxes. However, today trusts are considered “clumsy and costly”, according to the Wall Street Journal article. And, besides, with a trust you have to be willing and able to plan ahead which, apparently many wealthy people are reluctant to do.

As the Wall Street Journal explains about the newest exemption, “The break, known as “portability,” allows spouses to pass nearly $11 million of assets to heirs free of estate tax. Without it, many couples would qualify only for one estate-tax exemption instead of two.” 

Even those without double digit millions are well advised to look into portability, simply because it’s possible that the estate could grow to double digits down the road as assets rise in value, particularly if a surviving spouse lives on for decades. And, as the article points out, “ Besides asset growth, the survivor could get a windfall from elsewhere, such as an inheritance, or perhaps remarry someone with substantial assets.”

There are limits to the IRS’s generosity though. As the WSJ article states, “One taxpayer can’t pile up exemptions from several marriages. The taxpayer can only use his most recently deceased spouse’s exemption. This is a complex area with potential benefits and pitfalls, and affected taxpayers should seek expert help.”

Even the wealthiest cannot avoid death, but the wealth can live on tax-free!


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