Podcast Summary: AICPA Personal Financial Planning (PFP)
Episode Title: Estate Planning & Portability {PFP Section}
Release Date: February 7, 2025
Host: Keri Sinnett (A)
Guest: Robert Keebler, CPA (B), Partner at Keebler and Associates
Length: ~21 minutes
Episode Overview
This episode dives into a critical estate planning topic: portability of the federal estate and gift tax exemption. Host Keri Sinnett welcomes Robert Keebler, a nationally recognized estate planning CPA, to clarify what portability is, why it's essential for surviving spouses, how deadlines and tax law may impact planning, and practical steps practitioners should take. The discussion is timely given the elevated estate tax exemption set to sunset, potentially reducing a family’s tax shelter by millions. The episode is a must-listen for CPAs, lawyers, and anyone advising high-net-worth clients on estate transitions.
Key Discussion Points & Insights
1. Portability Basics & Core Concepts
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What is Portability?
- Portability allows the unused portion of a deceased spouse’s federal estate and gift tax exemption to transfer to the surviving spouse.
- Example: “If I died…instead of my wife having $13,990,000, she can double that.” [02:15]
- This transfer allows up to nearly $28 million to pass tax-free federally (2025 figures), but not all states recognize portability.
- Portability does not apply to the Generation Skipping Transfer (GST) tax.
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Key Terms Defined
- “Deceased Spousal Unused Exclusion (DSUE)” – the portion of the exemption not used at death, which can transfer to the surviving spouse.
- “Bypass Trust” – a trust created at death to avoid estate tax at the second spouse’s death.
2. Operational Mechanics & Filing Deadlines
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Use It or Lose It
- Portability is only preserved by timely filing IRS Form 706 (estate tax return).
- “If you don’t do the right things to use the exclusion amount…is it possible for it to be lost if you fail to file a return? That’s the heart of the problem.” [04:50]
- The standard deadline is 9 months after death, with a possible 6-month extension (15 months total).
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Late or Corrective Elections
- If no timely election is made, estates below the exemption amount can file for up to 5 years after death.
- Over the threshold? Relief is not available after missing original deadlines.
3. Why Practitioners Miss Portability – And the Cost
- Estate tax knowledge among CPAs/lawyers has eroded as the exemption rose (“muscle memory” faded) [06:37].
- “At 14 million, you’re not talking to every client about portability.” [07:59]
- With the exemption potentially dropping, planning for a lower exclusion is crucial: “That man or woman…when they die, will only have half of the exemption.” [11:34]
4. Strategic Planning Decisions: DSUE vs. Bypass Trust
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Spreadsheeting the Decision:
- Deciding between using the portability (DSUE), funding a bypass trust, or combining both is highly numerical.
- “This is not a decision for English majors…it’s a decision for CPAs.” [09:26]
- Factors: potential asset growth, ages/health, types of assets (e.g., IRA considerations).
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Basis Step-Up Considerations:
- If the surviving spouse holds assets until death, there is a full step-up in basis, possibly reducing future capital gains taxes.
- “If she owns that property when she dies…she gets a step up in basis.” [16:37]
- Sometimes partially funding the bypass trust is optimal (“Solomon-like approach”).
5. Actionable Guidance for Practitioners
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Ask the Question Every Time:
- “Every time somebody dies, ask yourself the question, should we be filing an estate tax return to obtain portability?” [18:22]
- Even if only preparing the 1040, practitioners should raise the topic if large wealth is evident.
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Cultural Differences in Practice:
- Division of responsibility for filing Form 706 varies geographically—lawyers in northeast tend to be more engaged, while elsewhere CPAs may be expected to handle it.
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Risk/Reward Framing for Clients:
- “You’re talking $5,000 to $10,000 to do that return compared to the possibility of saving $5.6 million of estate tax.” [18:45]
- “When I do that, people just look at me like why are we having this conversation, right?” [19:22]
Notable Quotes & Memorable Moments
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On Portability Filing:
- “As long as you file the return, [portability] is an automatic election...you can elect out of it, but you can’t really elect into it. Just filing the return elects into it.” (B) [04:50]
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On Planning for Sunsetting Exemption:
- “Until the tax law clarifies itself, we should assume it will sunset and that that man or woman sitting across from you will…have only half of the exemption that they have today in 2025.” (B) [11:34]
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On Practitioner Responsibility:
- “Even if you’re just doing the 1040s and 1041s, ask the question…it doesn’t mean it becomes your responsibility, but you can certainly ask the question and make sure you’re forcing everyone in the room to think through the issue.” (B) [12:25]
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On Balancing Basis Step-Up and Bypass Trust:
- “You might say the disclaimer sounds good, but let’s think about you keeping the property. So when you die there’s a second step up in basis…And this is something you just have to spreadsheet.” (B) [16:37]
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On Value of Filing for Portability:
- “I will draw on a piece of paper a fraction…and when I do that, people just look at me like, why are we having this conversation?” (B) [19:22]
Timestamps for Important Segments
- Introduction & Opening Question – [00:00-01:59]
- Portability Overview & Federal vs. State Laws – [01:59-04:32]
- Portability Mechanics & Deadline for Filing – [04:32-05:54]
- Late Filing & Corrective Actions – [05:54-07:59]
- Impact of High Exemptions & Sunsetting – [07:59-11:57]
- Advisor Roles, Practitioner Challenges – [12:25-13:12]
- How to Start “The Conversation” – [13:12-14:43]
- Risk of Missing Deadlines, Five-Year Rule – [14:54-16:03]
- Basis Step-Up & Planning Tactics – [16:37-18:10]
- Final Advice & Key Takeaway – [18:10-19:43]
Final Takeaways
- Always Evaluate Portability: Every client death is a prompt to review whether a timely portability election has been (or should be) made.
- Assume the Exemption Will Drop: Plan conservatively and assume the estate tax exemption reverts to ~$7 million per person post-2025.
- The Cost of Filing Is Negligible Versus Potential Savings: Paying for the return can yield millions in tax savings.
- Communication and Diligence Matter: Even if not “required,” practitioners must ask the portability question when large estates are involved.
For more resources and tools on this topic, visit the AICPA PFP section at aicpa.org/pfp.