The federal estate tax law has a portability provision; that is, it allows the transfer of the federal estate tax exemption from the decedent to the surviving spouse. If the correct estate tax planning steps are taken, residents of New Jersey might be able to double their estate tax exemptions.
The maximum federal tax exemption for those who die is $5.25 million per individual, and that amount is not expected to change through the year 2014. If couples are legally married, the federal exemption may pass from the first to die to the surviving spouse. Therefore, when the second spouse dies, the amount will double, increasing from $5.25 million to $10.50 million. However, it is important to note that the only way that individuals have an opportunity to double their estate tax exemption is if they fill out an IRS Form 706 within nine months of the first spouse’s death.
Some people may find the interpretation of all the laws and provisions that are related to estate tax planning very challenging, particularly since state laws may differ. Incorrect calculations or IRS forms submitted in an untimely manner after a spouse passes away can have devastating effects for those intended to receive the inheritance.
Those who do not establish professional estate plans many overlook important considerations. In addition, they may not know or understand all of the tax laws and provisions required as far as creating a sound estate plan is concerned. Those who wish to set up wills, trusts or other estate planning documents may benefit from receiving the advice of an attorney who may be able to guide them in the right direction.
Source: Market Watch, “How to double your estate-tax exemption“, Melody Juge, July 29, 2013