Does portability apply to lifetime gifts as well as assets that pass through an estate plan?
Yes. Under the new law, starting in 2011, the lifetime exemption and the estate tax exemption are expressed as a total amount, and it is possible to use this “unified credit” to transfer assets at either stage or a combination of the two. (From 2004 to 2010, the two amounts were different; the gift tax exemption remained at $1 million, while the estate tax exemption went up.) The estate tax exemption amount is reduced for lifetime taxable gifts. So if, for example, you have used $1 million of the exemption to make taxable lifetime gifts, the unused exemption when you die will be $4 million, rather than $5 million.
