Marital Deduction Planning and Portability: Problem Areas for Spouses, Second Marriages, QTIP Trusts, and Elections

Estate planning counsel and tax advisers have powerful tools to achieve significant estate and gift tax savings for clients. Marital deduction planning and portability provide counsel methods to protect increases in value between spouses' deaths and attain better income tax results.

Under current tax law, a person may leave property to their spouse, use the marital deduction, and elect to have the exclusion transfer to the surviving spouse. This results in the surviving spouse having more property in their estate, while also benefiting from their own exclusion and that of the predeceased spouse. Estate planners must carefully consider potential changed circumstances, second or third marriages, partners with children from current and previous relationships, and couples without children. All of which will determine which planning methods are appropriate for the client.

Under IRC Sec. 2056(a), to qualify for the marital deduction (1) the decedent must have been survived by a spouse, (2) the property interest must pass from the decedent to the spouse, (3) the property interest must be a deductible interest, and (4) the value of the property interest must be established.

The portability regulations require the executor of a decedent's estate to calculate the deceased spouse's unused exclusion and report the amount on the estate tax return to elect portability for the surviving spouse. Determining this amount involves a multi-step process for calculating the unused exemption amount under the regulations.

By walking you through real world examples utilizing the marital deduction and portability to maximize tax benefits for estate planning, our panel will examine the tax savings and other benefits of creating marital deduction and portability-based planning.

Listen as our panel discusses strategies and current problem areas in estate planning for spouses, types of marital deduction formula clauses, fractional shares, portability elections, and the computation and reporting of a deceased spouse's unused exclusion change to the deceased spouse's unused exemption.