Estate Tax “Portability”

A somewhat novel concept has wriggled its way into the recent tax relief act:  that of “portability” of whatever unused estate tax exemption is left by the first of spouses to die after 2010 and before 2013.

Recall that pre-2010 law did not allow for any unused portion of a decedent’s applicable exclusion amount to be used by the estate of the surviving spouse.  Consequently, married folk typically used an estate plan involving various trusts to enable them to take maximum advantage of each spouse’s exclusion.  Before 2010, f’rinstance, $3.5 million could be exonerated from tax by each spouse, which the reason for funding a “bypass” or “credit shelter” trust with that full amount of asset value.

So let’s say Hubby dies in 2011 with an estate of $3 million (a year in which the exemption has been raised to $5 million per person).  When Wifey may later die, if she has enough asset value, her estate would allow for exemption of $7 million (her own $5 million plus his “unused” $2 million amount)!  Not a bad deal.

But this rule only lasts until 2012, or unless Congress extends the concept in the mean time.  Who knows.

And speaking of the “wealthy” among us, be glad you don’t live in France – seems President Sarkozy recently announced that his government will abandon the existing “cap” on income tax rates which presently assure that nobody pays more than 50% of their annual earnings.

Such a deal, this “cap.”

Sarkozy previously espoused this limitation, but as in other countries which seem to be broke, the plan has come under increasing political pressure and criticism.

Speaking of which, we and thee should be glad, indeed, that movie huckster Michael Moore isn’t in charge of tax policy in these parts.  Get a load of his rant from last week, with reference to the so-called “rich”:

“They’re sitting on the money, they’re using it for their own — they’re putting

it someplace else with no interest in helping you with your life, with that money.

We’ve allowed them to take that.  That’s not theirs, that’s a national resource, that’s

ours. (emphasis added) We all have this — we all benefit from this or we all suffer as a result of not having it.”

Nice – sentiments similar to Obama’s as expressed to Joe the Plumber.  Also kind of reminds us of similar remarks made by little Robert Reich, recently,

who wrote:

“My proposal to raise the marginal tax to 70 percent on incomes over $15 million,

to 60 percent on incomes between $5 million and $15 million, and to 50 percent

on incomes between $500,000 and $5 million has generated considerable debate….

In the mid-1970s, for example, the top 1 percent got around 9 percent of total income.

By 2007, they got 23.5 percent.  So if anything, the argument for a higher

marginal tax should be even more realistic now than it was during the days

when it was taken for granted…..In fact, a Democratic president should propose

a major permanent tax reduction on the middle class and working class.  I

suspect most of the public would find this attractive.  But here again, the only

way to accomplish this without busting the bank is to raise taxes on the rich.”

“Redistributionism” anyone?  Let’s hope Robert’s public policy-making days are over.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.  Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 775-831-7288, welcomes comments below, and invites readers to view his other commentaries at