Article on The Rules of Portability

Tracy Blake DeVlieger (Partner, Gadsden Schneider & Woodward LLP) and Tiffany B. Carmona (Senior Vice President and Associate Fiduciary Counsel, Bessemer Trust) recently published their article entitled The Rules of Portability. The introduction to the article is below: 

This is the first in a series of articles that the Estate and Gift Tax Committee of the Income and Transfer Tax Group of the American Bar Association Real Property, Trust and Estate Law Section plans to present on the history, rules and planning aspects of portability of federal transfer tax exclusion between spouses. Portability, which was codified as Internal Revenue Code section 2010(c) pursuant to sections 302 and 303 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, sunsets with the rest of such Act on December 31, 2012. 

Why do we need to learn about portability? Why should we be concerned with a temporary provision that may apply only for a brief time? 

Portability is the current law and estate planning professionals are responsible for understanding its ramifications. 

There is a good chance that portability, a popular and noncontroversial middle-class-taxpayer-friendly provision, will become a permanent fixture of the federal estate tax system. Indeed, the Obama Administration’s FY 2012 budget proposes to permanently extend the provisions of the Act relating to the portability of unused exemption between spouses. 

We are obligated to offer portability to our clients as a planning option. We cannot just continue to create bypass trust estate plans without considering that stepped-up basis upon the death of the surviving spouse may offer the best overall tax result for some clients. 

Portability is a discussion we should be having with our clients now.