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How to use portability in your Missouri estate plan

On Behalf of | Jan 11, 2023 | Estate Planning

Most Missouri residents won’t have to deal with some of our government’s most complicated rules regarding estate taxes. However, if your family is wealthy, you might be impacted by the latest IRS change which could reduce the estate taxes levied at the time of a person’s death.

The IRS updated something called “portability.” This new ruling essentially doubles the exemption amount for surviving spouses.

Background on portability

There is a limit of $12.06 million exemption per person for gifts and estate taxes. You can give away up to $12.06 million before it impacts your estate taxes.

The amount can be given during the person’s life or death, meaning assets passed down or given away in your estate plan do count towards this limit. Many people use trusts to avoid paying estate taxes for this reason.

Now, there has been a significant update to portability. The update means that surviving spouses can delay paying estate taxes.

The rules of the update

If a person’s spouse dies, they now have the option to select portability. This option allows them to use their spouse’s unused gift exemption and their own.

This essentially doubles the exemption amount to $24.12 million before estate taxes. Surviving spouses have always been eligible to elect portability, but before they only had two years to elect it.

Now, surviving spouses have up to five years to elect portability. They also won’t have to request guidance from the IRS to claim portability, they will need to file an estate tax return. Staying engaged and up-to-date with your finances can make it easier when the time comes.