State estate tax portability
State estate tax portability is the use by a surviving spouse of a deceased spouse's unused state estate tax exemption. Estate planning practitioners describe Maryland as allowing the survivor to use that unused exemption and New York as not allowing it. Owners of businesses, real estate and private investments, along with their spouses, meet the difference through state estate tax exemptions that vary by state.
How it works
In Maryland, practitioners describe portability as the surviving spouse's use of the first spouse's unused exemption in addition to the survivor's own exemption. The arrangement is called portability.
An unused amount exists when the first spouse dies without using all of the Maryland exemption. The portion left over is the amount the surviving spouse may use.
Where it shows up for owners of businesses, real estate and private investments
Practitioners point to the limits of portability, noting that it may not be available for state estate tax exemptions in many states. They add that this can leave a need for planning for both spouses.
An owner who is married holds a business, real estate or private investments alongside a spouse who has a separate state exemption. Maryland treats each spouse's exemption as a per-person amount, and the unused portion of the first spouse's exemption is the part that moves to the surviving spouse.
New York does not allow spouses to transfer an unused estate tax exemption through portability. A New York owner's exemption therefore stays with the owner who holds it.
Points that are easy to confuse
Portability in one state does not describe the treatment in another state. Maryland and New York are described differently, and practitioners say many states may lack portability for state exemptions.
Thresholds and rates change. Check the state's own current figures.
Thresholds and rates change. Check the state's own current figures.
Common questions
How do Maryland and New York differ on portability?
Practitioners note Maryland lets a surviving spouse use the first spouse's unused exemption in addition to the survivor's own exemption.
Do all states allow state estate tax portability?
Trust and estate practitioners describe portability as possibly not available for state estate tax exemptions in many states.