For couples with assets under $10 million, a new concept of portability was introduced. Portability allows each partner of a married couple to use the unused portion of the other’s estate tax exemption. In other words, if spouse A dies with a taxable estate of $2 million, then the unused portion of the $5 million exemption transfers to the surviving partner leaving spouse B with an $8 million exemption. That’s their own $5 million exemption plus the unused $3 million from spouse A. This makes estate planning easier and may eliminate the need for many credit shelter trusts.
The $5 million exemption is good for 2011 and 2012. For estates of those deceased in 2010, they get to use the $5 million exemption rule, or carryover basis if they choose. The top estate tax rate during this period is 35%.