Portable Estate Tax Exclusions

One new concept in the 2010 Tax Act is in Section 303 of the Act which specifies that when a spouse dies the surviving spouse can elect to carry over to his or her estate the unused unified credit. Thus if H dies with a $5 Million estate and leaves it all to the wife, the Executor can elect to have it apply to her estate when she dies. But there is a curve ball in here. The act uses the term, “last such deceased spouse of such surviving spouse”. Let’s say that spouse one died and had $4 Million left over and then surviving spouse remarries. Spouse Two dies leaving a $5 Million estate to Spouse two’s children. Suddenly surviving spouse has no portability of that $5 Million. Thus, her estate loses that. And we don’t know the effect if spouse one dies in 2011 or 2012 and then the surviving spouse dies in 2013 with a $1 Million exclusion.