You can save millions with estate tax portability. I often hear questions like, “What can I do to save estate taxes?” or “How do I avoid paying estate taxes?” You should know about portability.
Estate Tax and Estate Tax Exemption
Before diving into portability, we need to understand estate taxes. Estate tax is a tax on the transfer of wealth. Basically add up all of your assets on death and there is a tax on it. Currently the top estate tax rate is 40%. The rest can go to your heirs. But it’s actually not as bad as it sounds. A portion of the total estate is exempt from estate tax. We call this the estate tax exemption. The exemption changes year to year, and you can look it up on IRS.gov. In 2023 the estate tax exemption is approximately $12.92 million per person. This amount is indexed for inflation so it increases a bit each year.
Note that the exemption normally would be half of what it is today but a few years ago President Trump signed a law that temporarily doubled the estate tax exemption. That law expires at the end of 2025. So beginning January 1, 2026 the estate tax exemption will go back to it’s normal amount (meaning it will be cut in half). Also note that there is an unlimited exemption for assets going to a surviving spouse on death.