Client Alert: 2010 Tax Act Provides Portability to Reduce the Estate Taxes Paid by Couples


As a part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312 (124 Stat. 3302) (the “2010 Tax Act”) and the corresponding changes to the Internal Revenue Code (the “Code”), the IRS is offering a new way for surviving spouses to reduce their estate tax bill if their spouse passed away after December 31, 2010.

In accordance with the 2010 Tax Act, the estate tax basic exclusion amount was increased from $1,000,000 to $5,000,000 for the 2011 and 2012 tax years. Under that same legislation, spouses now have a new “portability election” that makes the unused estate tax exclusion amount at the death of the first spouse “portable.”

Pursuant to section 303(a) of the 2010 Tax Act and section 2010(c) of the Code, a surviving spouse is able to make an election whereby she may take her spouse’s unused estate tax basic exclusion amount and add it to her own estate tax basic exclusion amount to be used upon her death. An example of the election’s benefit is as follows...

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