The Most Compelling Estate Planning Stories of the Decade (Part One)

The last ten years have provided the estate planning world with uncertainty, drama, and boundary-breaking stories. As we head into the 2020s, allow us to reflect back on some of the juiciest and most unexpected tales of modern estate planning. After all, to know where you’re going, you have to know where you’ve been!

Obergefell v. Hodges

June 26, 2015 marked a landmark Supreme Court decision: states can no longer prohibit same-sex marriage and must recognize valid out-of-state marriages. The justices cited the 14th amendment in their ruling – same-sex couples are entitled to due process and equal protection clauses that the amendment affords.

The ruling was a close one, with a majority of five justices overruling the four dissenters. While same-sex marriage is legal, the controversy over the Supreme Court’s decision is likely to continue for years to come. In the meantime, many same-sex couples are now enjoying the perks of married life and all the benefits that come with it. This, of course, includes portability and other estate planning fundamentals.

Permanent Portability

Speaking of portability, the creation of this policy in 2010 certainly warrants a spot on our list of most compelling estate planning stories. Introduced as part of the Tax Relief, Unemployment Reauthorization, and Jobs Creation Act of 2010, portability became effective for married people who passed away on or after January 1, 2011. For the uninitiated, portability grants surviving spouses permission to use their decedent spouse’s unused federal estate tax exemption.

Before this policy was created, unused federal tax exemptions would go to waste. It can have a significant impact on families who haven’t done any estate planning before the death of a loved one. Portability intentionality can simplify this process, but should mostly be used as a fallback when estate plans haven’t been completed. Still, the creation of a permanent plan for portability by the federal government can be counted as a win for all Americans.

The Aversion of the Fiscal Cliff

The year? 2012. The issue? The gift tax exemption rate reverting from $5 Million back to $1 Million by the end of the year. Factor in the additional estate and gift tax rate of 55 percent and you see why estate planners were in such high demand in the fall and winter of 2012!

Thankfully, this fiscal cliff was averted by Congress. By maintaining the rules of 2011 and 2012, lawmakers agreed to a plan that would keep everyone happy. The $5 Million estate and gift tax exemption became permanent and grows with the rate of inflation.  While the crisis was ultimately averted, this was indeed one of the biggest stories of the decade for the estate planning community!

***NOTE:  In December 2017, Congress passed the Tax Cuts and Jobs Act of 2017 which raised the federal exemption amount.  Currently, that exemption is $11.4 Million per person.  The Tax Cuts and Jobs Act of 2017 includes a provision which states that if no additional legislation is passed in the interim to make the change permanent, the exemption amount will return to the $5 Million level, adjusted for inflation, on January 1, 2026.

Leave a Comment