Hi, my name is John T. Anderson. Welcome to my blog! I have been practicing law in California since 1975 and have been the Chairman of the Estate Planning and Probate Section of the Long Beach Bar Association since the mid-1980s. I'm also certified by the State Bar of California Board of Legal Specialization as a specialist in Estate Planning, Trust and Probate Law. On this blog, you will find articles written by me regarding estate planning and probate in California. Many of these articles address recent changes in the law and summaries of the Long Beach Bar Association’s Estate Planning and Probate Section meetings. I hope that you find these articles helpful. If you would like more information about me or my law office, please visit my website at or contact my office at 562.424.8619.

Friday, March 4, 2011

More on the Portability of Estate Tax Exemption

Probate, Trust and Estate Planning Tidbits.
by John T. Anderson, Chairman
Certified Specialist in Estate Planning, Trust
and Probate Law by the State Bar of California,
Board of Legal Specialization

More on the Portability of Estate Tax Exemption

The Tax Relief (etc.) Act of 2010 was signed into law by the President on December 17, 2010.  At long, long last we had some indication of what will happen with the Unified Credit/Estate Tax Exemption.  The issue is, does it help with Estate Planning???

Several Billionaires died in 2010 with zero Estate Tax but only a minuscule adjustment to income tax basis.  But we now know that, at least those with estates of $5 million or less, there is no estate tax in 2011 and 2012 and that above $5 million the top tax rate is 35%.  But we got nothing to allow us to do long-term estate planning.  Unless your clients say with certainty that they will die during 2011-2012, you live and plan with the same uncertainty you had prior to December 17, 2010; because for now, on January 1, 2013, we go back to the $1 million exemption and 55% top tax bracket. 

Note that the Gift Tax Exemption and Generation Skipping Exemption has also been adjusted for 2011/2012 to $5 million and 35% tax rate above $5 million.  This provides for possibly huge multi-generational planning possibilities.

In addition to the two years of adjusted exemption, we have the concept of “Portability of the Exemption from Estate Tax.”  For those two years, only, for spouses, if one spouse dies without using his/her total exemption, the amount of the exemption not used passes to the surviving spouse.  So, if husband dies in 2011/12 and leaves everything to wife, no part of his exemption is used due to the Marital Deduction.  His remaining exemption ($5 million) passes to wife.  If wife dies during that period (2011-12), she would have her $5 million AND his $5 million, and her estate includes all of the assets.  This is not necessarily as advantageous as the A/B or A/B/C/ Trust however if property appreciates in value, since assets going into the exempt or by-pass trust would be exempt including appreciation at surviving spouses’s death.  So, plan with care.  In addition, no one know what happens with “portability” come January 1, 2013.
Mark your calendar for the upcoming Long Beach Trust, Estate Planning and Probate Brown Bag Luncheon:

Thursday, April 28, 2011, Michael Trainotti, Esq., will be sharing his thoughts on Estate Tax and Related Tax Law Changes for 2011-2012 (and 2010?)  In addition, Judge Paul will give special recognition to those who have so faithfully given of their time and expertise to volunteer for the Pro Per Guardianship Panel.

We meet at the Long Beach Superior Court in Dept. G (on the 5th floor).  There is no charge for the meeting.

                John T. Anderson, Section Chair
                Certified Specialist in Probate, Trust and Estate Planning
                by the California State Bar Board of Legal Specialization

Copyright © 2011 by John T. Anderson
All articles by John T. Anderson may be copied for personal use, only. All articles or outlines from others may be used only with their personal authorization. Any approval is for personal use, only, and for non-commercial purposes.
File Location: C:\Users\John's LT\Documents\Work\Website\Articles for Website\Word Version of Articles From Lisa\2011.03.04  Portability of Estate Tax Exemption.docx