You Get to Keep the $12.060 Million Exemption
In our last post we discussed whether having a bypass trust is better than portability. A reader sent us a comment regarding the fact that the current $12.060 million exemption is scheduled to be cut in half beginning in 2026.
That is correct for anyone that is living at that time (unless Congress makes it permanent). However, for anyone passes away before January 1, 2026, the full amount of the current unused exemption amount is available to the surviving spouse. It is not reduced at that date.
As an example, assume that I pass this year and I leave all of my assets to my wife. My unused current exemption is $12,060,000 and the executor makes the election to port it over to my wife. If she passes in 2026 when her exemption is probably close to $7 million if inflation keeps up, her estate can be worth up to $19 million and owe no federal estate tax.
Also, my wife can use my $12.060 million exemption to make lifetime gifts and if she gets lucky and wins the lottery she can give away that amount and then marry someone with a full exemption. We call this estate tax arbitrage (this is called a CPA’s attempt at humor).
She needs to make sure not to marry someone before she gives away the $12 million. Once she marries that person, the unused exemption from me disappears.
This can get complicated and you should always review this with your estate tax advisor.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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