Among the horse-trading in Washington leading to our present Gift and Estate Tax, was the implementation of "Portability." This allows the retention of unused "tax credits" upon the death of the first of a married couple. It isn't automatic, requires the filing of the complex Federal Estate Tax Return (Form 706) in order to establish the portability amount, and in itself has many Byzantine elements to confuse and befuddle.

The value of "Portability" is more than it initially appears. It may be used to increase tax basis in assets with built-in gain. Own an interest as a "Tenant in Common" real estate venture? This is often used to do a 1031 real exchange and remove the management responsibilities. It also has built in gain, and may be in a state with an independent estate tax. Portability may be applied to increase basis and limit the state tax.

There is discussion and debate over how to best implement the portability to permit the various effects available. It isn't a simple fix, but is a valuable concept. The best choices are to protect these options with your estate planning. Oh, for the days of comparative simplicity!