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Taking advantage of estate tax portability

On Behalf of | Apr 21, 2021 | Estate Planning |

Those engaged in the estate planning process in Georgia quickly begin to realize that several opportunities to reduce liabilities against their estates. They can plan to settle outstanding debts before (or upon) their deaths, or to structure their estate plans so as to avoid probate. Yet most likely resign themselves to the notion that they cannot avoid estate taxes.  

However, that may not be the case. First off, Georgia does not impose an estate tax on its residents. This means that one only need concern themselves with federal taxes. With the right plan, one might be able to reduce (or even avoid) them as well.  

Understanding the federal estate tax exemption

The federal government allows for an estate tax exemption which helps people to avoid a potential tax burden. According to the website, the exemption threshold for 2021 is $11.7 million. This means that those estates whose total value comes in below that amount will not be subject to tax.  

Even those estates where the potential for paying federal taxes exists, some may be able to extend that exemption amount even further. That is possible through estate tax portability (which married couples may take advantage of).  

Planning for portability

Portability refers to the sharing of tax benefits between eligible parties. In the case of estate taxes, one may claim their deceased spouse’s unused exemption. Should one plan to leave their entire estate to their spouse, that amount passes free from taxes (thanks to the unlimited marital deduction). This preserves their entire estate tax exemption amount. According to the Internal Revenue Service, their ex-spouse can then claim that exemption (and combine it with their own) by filing an estate tax exemption electing portability. This effectively extends the surviving spouse’s exemption to $23.4 million.