James F. McDonough
Of Counsel
732-568-8360 jmcdonough@sh-law.comFirm Insights
Is Income Tax Planning Now More Important Than Estate Tax Planning?
Author: James F. McDonough
Date: June 6, 2013
Key Contacts
Back
Two changes to federal estate tax law suggest that income tax planning may become more important than estate planning for most taxpayers.
First, the $5,250,000 federal estate tax exclusion (the “Exclusion”) is permanent. Thus, most estates will not be subject to federal estate tax now that the Exclusion is law. A married couple may pass $10,500,000 to their heirs free of federal estate tax using the sum of their two Exclusions.
Second, “portability” now permits a surviving spouse to add the unused Exclusion of the deceased spouse to the Exclusion of the surviving spouse. Before portability, the exclusion was lost if it not was not applied to shelter a taxable transfer at the first death. Today, portability lessens the importance funding a trust in the estate of the first-to-die.
Some practitioners believe that all assets should be held by the surviving spouse in order to obtain another step-up in basis at the second death. The assumption is that a step-up in basis at the second death will eliminate income taxation. Where the value of the second estate is below the level of one or both Exclusions, the result is no tax.
There are counter arguments. An estate tax return must be filed to elect portability and we know that many taxpayers will fail to file and lose portability. I anticipate that there will be a number of cases where a surviving spouse remarries. What the public may not realize is that portability only extends to the last spouse. Thus, if the surviving spouse remarries, the anticipated result may not be achieved. could It is also possible that, given the liquidity infused into the banking system by the Federal Reserve, inflation will result. This could cause asset values to increase beyond the Exclusions for intermediate size estates. Finally, the exemption for generation skipping tax is not portable and this fact suggests that funding a trust at the first death may still be beneficial.
- Practices: Tax and Trusts & Estates
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Why Secured Transactions Are Important
Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]
Author: Dan Brecher
Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications
Cashing a check marked “paid in full” can be a risky endeavor, particularly if you don’t fully understanding the legal implications. If you are owed more than the amount of the check you accept and deposit, you may waive your right to collect the full disputed amount. That is why you should consider either rejecting […]
Author: Dan Brecher
Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors
The One Big Beautiful Bill Act of 2025 (OBBBA) significantly impacts federal taxes, credits, and deductions. A key change relating to Qualified Small Business Stock (QSBS) allows greater tax-free gains for investments in startups and other qualifying small businesses. Company founders and other investors should understand how the enhanced tax strategy works or risk missing […]
Author: Dan Brecher
Corporate Consolidation and Antitrust Issues in Mergers
Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]
Author: Dan Brecher
What is Business Law and Why Is it Important?
Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]
Author: Dan Brecher
Corporate Transactions: Best Practices for Successful Deals
Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.