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The move that protects everyday millionaires from the estate tax hit in 2026

October 5, 2022Media Mention
Accounting Today

Private Client Services partner Marc M. Stern was quoted in an article published in Accounting Today discussing the recent Internal Revenue Service (IRS) Revenue Procedure that extends the period during which the unused exclusion of a deceased spouse can be transferred to the surviving spouse, commonly referred to as "portability." Below are excerpts from the article in which Marc was quoted:

Say a husband dies today and leaves his wife $8 million and the wife has $8 million of her own assets. If portability is elected within five years, she can add the husband's $12 million exclusion — even if she makes a portability election in, say, 2027, when the inflation-adjusted individual exclusion will be around $7 million. Without portability, the wife's estate would owe the 40% estate tax on nearly $9 million of assets ($18 million minus $7 million), or $3.6 million. The scenario, said Marc Stern, a partner in the private client services group at Greenberg Glusker in Los Angeles, assumes that neither spouse has used up any part of their lifetime exclusion by making gifts to heirs.

So why should people who are below or near their exemption level plan to file the document? It's not only that a deceased spouse can leave the survivor amounts that exceed her exemption, Stern said. There's also the possibility that the surviving spouse may inherit additional money from other relatives.

With the new five-year limit, the IRS isn't creating a bigger benefit for people seeking to transfer assets to heirs. "Somebody still has to die" to lock in the exemption in existence when you pass, Stern said.