Tax Law Allows Married Couples to Reduce Their Estate

Married couples take note: Congress passed a law in 2010 that can significantly reduce the amount your estate pays in estate taxes. Unfortunately, most couples are either completely unaware of this opportunity for savings, or they find out about it too late to take advantage of it.

This recent article in the Wall Street Journal gives an example to explain the law both under the previous law and the newer, 2010 law: “A husband and wife together have $7.5 million of assets, $6 million of it in a business owned by him and the rest owned by her. Under prior law, if they died and each partner left everything to the other (with no trusts), the estate of the second-to-die partner would owe federal tax on $2.5 million—even though the law gave each spouse a $5 million exemption. Under the new rules, when the first partner dies—say it’s the wife—the executor files an estate-tax return preserving the value of her $5 million exemption. The result: At the husband’s death, the wife’s exemption is added to his, and the entire $7.5 million passes to heirs tax-free.”

Taking advantage of this opportunity isn’t difficult to do… but only if married couples (or their financial/legal advisors) are aware of the law. And in this case it’s not enough to be simply aware of the law, couples will need to be made aware of the law in time to take advantage of it within the limited time frame. “An estate-tax return must be filed soon after the first partner’s death—usually within nine months—in order for a couple to get this new benefit.”

For more information about this beneficial tax law, or to find out how to take advantage of it before it’s too late, please contact our office.

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