Personal Finance

Monday, March 2, 2015

One step could provide big savings on future estate taxes

High Net Worth Planner, Chris Haidinger, provides a simple definition of Estate Tax Portability.



We speak to clients almost every day about estate planning. The most frequent reason clients give for not completing an estate plan is the Federal Estate Tax Exclusion. However, estate and income tax planning can still have a significant impact on taxes which might arise in the event of someone’s death.

For 2015, estates that are under $5,430,000 per person; $10,860,000 per married couple, are excluded from paying Federal Estate Tax. Clients whose assets are lower than these limits feel protected from Federal Estate Tax. But what happens if after the death of a spouse, the surviving spouse comes into a windfall that pushes them over their limit of $5,430,000? All of a sudden, Federal Estate Tax is back in the picture. This might be a rare situation, but does occur with some clients.

There is a way to further insulate yourself from the estate tax. It is called Estate Tax Portability. This allows the first spouse’s estate tax exclusion ($5,430,000) to be combined with the surviving spouse exclusion ($5,430,000) for a total exclusion of $10,860,000 at the time of their death.

In order to take advantage of both exclusions, a Federal Estate tax return (Federal Form 706), must be filed upon the death of the first to die. To secure both exclusions, it requires the survivor to check a box on form 706 to preserve the decedent’s exclusion which can only be accomplished by filing the Federal Estate Tax Return.

Another benefit of this tactic is that the surviving spouse can use the inherited exclusion ($5,430,000) while they are still alive by making gifts to individuals in excess of $14,000 in a given tax year, but not in excess of $5,430,000 without incurring a gift tax liability.

Since specific actions must be taken at the event of the first spouse’s death, we make sure to tell our clients, particularly those clients with assets close to the exclusion limit ($5,430,000), about this strategy. If the correct action is not taken, their spouse’s exclusion is lost forever.

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Christopher Haidinger
First Vice President/Director/High Net Worth Planning Group

Chris Haidinger is a Certified Financial Planner™. He creates investment and tax planning strategies for individuals and businesses to help maximize the productivity of their assets.

Mr. Haidinger is currently a member in good standing with the International Board of Standards and Practices for Certified Financial Planners™, the Delaware Valley Society of the Institute of Certified Financial Planners™ and the International Association of Certified Financial Planners™. He holds a Bachelor of Science in Finance from Susquehanna University, and is a graduate of the SII (Securities Industry Institute) Program at the Wharton School of Business.


Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any taxrelated statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

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