We would like to provide some clarity with regard to the spousal estate tax exemption at the federal level. If you are married you may leave any amount of money to your spouse without incurring any federal estate tax liability.
However, this exemption should not be viewed as an estate planning cure-all. Invariably your husband or wife is going to want to leave the assets that he or she inherited from you to loved ones. At this point the estate tax will in fact be looming because the exemption does not extend to your children or grandchildren.
So, if you simply leave everything to your spouse you are not really accomplishing anything other than a postponement of the inevitable.
Another relevant thing to consider is the portability of the estate tax exclusion. Every person is entitled to a $5.12 million unified estate/gift tax exclusion this year. So what happens to your exclusion once you pass away? Can your spouse utilize it?
The answer is that the estate tax exclusion that went unused would be available to your surviving spouse for the rest of 2012. However, under currently existing laws the estate tax exclusion will no longer be portable in 2013, and in essence your exclusion would die along with you.
It is always possible that changes to the existing parameters could be implemented. Due to the dynamic nature of relevant laws it is always going to be a good idea to keep in touch with your estate planning lawyer to be certain that your existing plan is providing full tax efficiency as circumstances change.
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