Should We Rely On Portability?

When Congress early this year enacted the new estate tax provisions making the $5 million inflation adjusted federal estate, gift and generation-skipping transfer (GST) tax exemptions "permanent," it also made the concept of portability permanent. Portability is a welcome addition to the estate tax laws because it eliminates a common trap for the unwary couple by allowing a surviving spouse to use any unused federal estate tax exemption of the predeceased spouse. This allows the couple to hold their assets as they wish without the need to separate assets into "his and hers," and it may avoid the need for complicated trusts, which some clients do not prefer. The unused exemption inherited by the surviving spouse is referred to as the deceased spousal unused exemption (DSUE) amount. While portability offers a safety net for a married couple who did not engage in traditional estate planning, did not wish to use trusts for a surviving spouse, or did not wish to separate