Feb 1, 2011 12:00 PM

Implications of the 2010 Tax Act's “portable” exclusion

By Deborah V. Dunn

The bypass trust, also known as the credit shelter trust, the family trust and the “B” trust, has been the foundation of estate planning for married couples since before I started practicing law. Prior to 2011, such a trust was necessary to ensure that the applicable exclusion amount of the first spouse to die wasn't wasted. Otherwise, if all of such spouse's assets were transferred to the surviving spouse in a manner that qualified for the marital estate tax deduction, they would be included in the surviving spouse's estate upon his death. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the 2010 Tax Act), however, introduced a new concept into the estate planning world: “portability” has replaced “use it or lose it.” Under the 2010 Tax Act, for decedents dying after 2010, a surviving spouse can utilize the unused applicable exclusion of his deceased spouse. Nevertheless, for the reasons discussed below, although portability is certainly a welcome and useful addition to the estate tax regime, the bypass trust should remain the foundation of most married couples' estate plans.

Section 303(a) of the 2010 Tax Act amends Section 2010(c)(2) of the Internal Revenue Code of 1986¹ by adding new paragraphs (c)(3), (4), (5) and (6) and makes certain conforming amendments to other IRC provisions (See “2010 Tax Act Amendments,” this page).

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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