For decedents who die after 12/31/2010, Congress has provided a new tax exclusion amount of $5,000,000 plus what is known as a “Portable Exclusion”. What is the “Portable Exclusion”? The portable exclusion is the deceased spousal unused exclusion amount. Simply stated, the portable exclusion is the amount of the basic exclusion (presently $5,000,000) less the amount of the basic exclusion used to offset a deceased spouse’s taxable estate. Example Jacob’s tentative taxable estate, before the basic exclusion, is $3,000,000. Therefore, $3,000,000 of the basic exclusion is used to offset Jacob’s taxable estate. This means $2,000,000 of the basic exclusion is still available. Therefore the “Portable Exclusion” of $2,000,000 ($5,000,000 less $3,000,000) is now added to Harriet’s (the surviving spouse) basic exclusion amount. Harriet has a new basic exclusion of $7,000,000 (her basis exclusion of $5,000.000 plus Jacob’s unused amount of $2,000,000). This amount is now available for Harriet’s estate for lifetime gifts or for transfers at death. THE REMARRIAGE OF HARRIET-DEATH OF MAXWELL What happens when Harriet marries Maxwell and then Maxwell predeceases Harriet? Harriet is now restricted to using the “Portable Amount” of theLast Spouseto die. Therefore, the executor then re-determines the unused portion of Maxwell’s basic exemption of $5,000,000. Say that Maxwell’s estate uses $4,000,000 of the allowed $5,000,000 exemption leaving $1,000,000 unused from a 2nd spouse. Harriet has her $5,000,000 plus the new predeceased spouse’s unused exemption of $1,000,000 or $6,000,000.Note:Jacob’s unused exemption is no longer available. Now, it gets a bit complicated: ·None of the Portable Exclusion, as described above, can be used unless the Executor of a deceased spouse’s estate files a timely estate tax return (including extensions) and makes the election for the portable exclusion. Once the election is made, it is irrevocable for the first deceased spouse. ·When the second spouse (2marriage-Maxwell) dies, one can’t just skip the portable exclusion computation by not filing the 706 and making the election. It is mandatory to compute the portable exclusion of the second spouse as if the first spouse’s (Jacob) portable exemption never existed. THE REMARRIAGE OF HARRIET-DEATH OF HARRIET What happens when Harriet marries Maxwell (2spouse) and Harriet predeceases Maxwell? What is Maxwell’s portable exclusion? Under existing law, the portable exclusion from Harriet’s estate is limited to the lesser of $5,000,000 or $5,000,000 less lifetime gift(s) transfers at death. In this case, Harriet’s estate would lose the $2,000,000 gained from the portable exclusion that was added to her estate’s basic exclusion from her first husband’s (Jacob) estate. It appears this is not what Congress intended. A technical correction is pending. It will allow the portable exclusion amount of the last predeceased spouse (Jacob’s $2,000,000) to be added to Harriet’s basic exclusion amount ($5,000,000). The total amount ($7,000,000) will then be applied to Harriet’s estate exclusion upon her death. Additionally, assuming that Harriet made no lifetime gifts or transfers at death, Maxwell’s applicable exclusion amount would be Harriet’s $7,000,000 plus his own $5,000,000, or a total exclusion of $12,000,000. PRO-Tip: The Generation Skipping Tax exemption isnotportable; thus, the GST basic exclusion is $5,000,000 under current law. ...read more
By Gary R. St. Pierre, CPA's August 01, 2011
We've just published a new edition of our newsletter! You can check it out on our website and get the latest information from Gary R. St. Pierre, CPAs. Let us know what you think! Read It Now Here ...read more
By Gary R. St. Pierre, CPA's October 26, 2010
The Catholic Archdiocese of Chicago Diaconate Community presented the St. Stephen Symposium XIV at in . Gary St. Pierre, CPA of the firm Gary R. St. Pierre, CPA's presented a tax seminar to Deacons guiding them in dealing with specific personal and professional tax needs and requirements related to their ministries. The seminar empowered Deacons as family advisors during bereavement ministry to help guide those in need when a loved one is lost. This kind of support and direction can often provide comfort, security, peace and proper closure to families in trauma. Mr. St. Pierre is a long-term specialist in the area of estate, trust and business tax services and has guided many Executors through the process of estate settlement. More information and a guide for Executors can be found on his website at http://www.stpierrecpa.com. Mr. St. Pierre was assisted and invited to speak before the Diaconate by Deacon Andy J. Beierwaltes of St. John Brebeuf Parish in . Mr. Beierwaltes is a financial advisor for AXA Advisors http://www.AXAonline.com ...read more
By Gary R. St. Pierre, CPA's October 25, 2010
Making the decision to sell one's stocks can be very confusing if one is a novice. There are a number of factors that should be considered when selling stocks, such as what price one should sell the stocks for and when is a good time to put them on the market. ...read more