One of the concerns weighing on those tasked with administering the estates of their family members or friends is the issue of taxes. Often it is assumed that an estate will automatically owe tax, yet that is not always the case. Indeed, according to information shared by the Internal Revenue Service, only 33,000 estate tax returns are projected to be filed in 2019. Given that the United Nations World Population Prospects reports shows that over 7,400 Americans die every day, one can see just how few estates actually have to deal with the estate tax.
This is because the federal government has set a threshold determining which estates will actually be taxed. Per Forbes Magazine, the threshold for 2019 is $11.4 million. Any estate whose total taxable value is less than that amount will not be taxed. Thus, many may plan to pass on assets to heirs without their personal representatives having to deal with such encumbrances.
Married couples can protect even more than the $11.4 million threshold amount by electing estate tax portability. This allows them to combine the their exemptions, protecting up to $22.8 million for their posterity. Yet taking advantage of portability requires that those managing an estate follow the right processes.
First, one must utilize their unlimited marital deduction to transfer their assets to their spouses upon their deaths (the martial deductions allows assets to be transferred between spouses tax free). Then those managing the decedent’s estate must file an estate tax return the same year that they die electing portability. If they do not, then the previous transfer of assets from the decedent to their spouse could push the value of the spouse’s estate above the threshold and make it subject to tax.