Listen up, financial advisors: There’s a simple way to help wealthy clients shield more of their estates from taxes, yet it’s often overlooked.
That’s according to InvestmentNews, which looks at what’s known as “portability” for married couples.
This strategy allows a surviving spouse to inherit their deceased spouse’s estate-tax exemption, which – thanks to the 2017 tax law – currently stands at $11.4 million for individuals. That means the surviving spouse can pass down $22.8 million to heirs when he or she dies without triggering the 40% federal estate tax.
But clients or their advisors have to be on the ball to benefit from portability. They must file tax form 706 within nine months of the first death, although there’s a six-month extension to file.
Because the estate-tax exemption for individuals is so high now, some advisors might not worry about portability for clients whose estates aren’t near the threshold. But barring further action from Congress, the individual exemption will revert in 2026 to the 2017 level of $5.49 million, adjusted for inflation.
Also, an estate that might not be close to the threshold can grow significantly if one spouse dies long before the other.