You still can’t take it with you

But now you can leave more to your heirs

An IRS rule called “portability” now allows couples to combine their estate-tax exemptions. For 2015, the exemption is $5.43 million per person, or nearly $11 million per couple to shelter gifts made during their lifetimes or assets left in their estate. The amount will be adjusted for inflation over time.

Before this ruling, at the second death, only one exemption was left for their heirs. Estate planners worked around this using trusts, but this required planning ahead—and trusts can often be both expensive to set up and complicated to manage.

Spouses have been able to leave assets to each other free of estate tax since 1981, but if you left everything to your spouse without setting up a trust the $5.43 million exemption would go to waste. Now you can combine your exemptions so any unused amount carries over to the remaining estate without using a trust.

Congress established portability as a temporary solution in 2010 and made it permanent in 2013. What’s new in 2015 is the finalization of the rules. A few highlights:

• Portability is not automatic. You must file estate tax returns to take advantage of it, usually within 9 months of the first
• It’s best to protect portability by filing returns even if an estate is smaller than the exemption at the time of the first spouse’s death. The estate may well grow over time, especially if the second spouse lives on several decades.
• Spouses can carry the unused exemption into their next marriage. So if a widow remarries, her first husband’s unused exemption, plus her own, are available while the second husband is alive. But you can’t stack exemptions from several marriages. Only the most recent qualifies.

With this new ruling, only about 4,000 estates are expected to owe taxes this year.

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