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Estate Tax Portability: Why More People Than Ever Will File Estate Tax Returns in 2011 and 2012

If Your Spouse Dies in 2011 or 2012
You May Think That There
Is No Estate Tax Return Due

You Might Right And You Might
Be Surprised To Know You Should
Still File

Most people now know, that if they die during the calendar
year 2011 or 2012 that there is a five million dollar exemption
from federal estate taxes.

And, it would be logical to therefore assume, that if you lose a spouse
during 2011 or 2012, and if your spouse’s assets are less than
five million dollars, that you would not need to file a return.

In fact, that’s true.  You don’t have to file.

But, because of something called federal estate tax
PORTABILITY, you will certainly want to.

If you fail to file, then you do not “inherit” your deceased
spouse’s remaining credit amount.

Perhaps an example will help to make this strange idea
of portability a bit clearer.

If spouse A passes away and has three million dollars worth
of assets that pass directly to surviving spouse B who has
his/her own assets of one million dollars and they
also have 2 million of joint assets, the surviving spouse
ends up with assets totaling six million dollars.

However, if the surviving spouse fails to file a federal
estate tax return at the death of the first spouse, she only
has her own five million dollar exemption.

That amount will not cover the six million dollar estate
that she will have at her death.  One million dollas will
be taxable.

To avoid this result, all the surviving spouse has to do
is file the federal estate tax return at the death of the first

Now this type of return can be expensive – as hiring
lawyers almost always is.  They are complicated, they are
time intensive, they require obtaining extensive amounts
of information about assets and their valuation, but
by filing the return she inherits the five million dollar
exemption of the first spouse and this alone might save
their children or heirs hundreds of thousands or even
millions of dollars of federal estate tax at the death of the
second spouse.

Complicated.  Yes.  Oversimplified here?  Yes.

But the basic theory is simple.  If a spouse passes away in
2011 or 2012 be sure to seek advice from a knowledgeable
a lawyer who keeps current in these matters about the need
to file a federal estate tax return.

For more information on this important topic read FORBES
on the federal estate tax and portability.

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