By: Jim Dossey, MS, MBA, JD -
Andy Rooney, the folksy and offbeat commentator for 60 Minutes, died in November 2011 at the age of 92. At the time of his death, Rooney's estate was estimated at $9 Million, consisting of $8MM in stocks, bonds, and cash and $1MM in real estate.
Rooney's Will left his entire estate to his four children. According to Rooney's son, his father lived rather frugally and "wasn't into fancy estate planning." Details are limited about the contents of Rooney's Will; however, by all accounts it was unlikely that Rooney thought about even basic tax planning for his estate.
At the time of Rooney's death, the estate tax exemption was $5,000,000. Thus, with no tax planning, Rooney's estate incurred $2.3MM in state and federal estate tax. After the taxes were paid, each of Rooney's children inherited $1.675 Million. Not too bad, but with proper planning, each of them would have inherited $2.25MM, almost $600,000 more.
Even without tax related estate planning, this result would likely not apply today. Starting in 2011 with the implementation of The Tax Relief, Unemployment Reauthorization, and Jobs Creation Act of 2010, Congress introduced the concept of "portability." Under portability, the surviving spouse can utilize a deceased spouse's unused estate tax exemption. In simple terms, if the deceased spouse does not make any taxable gifts during their lifetime, portability gives the surviving spouse the ability to pass $10.6MM (2014 exemption, indexed to inflation) to his heirs tax free, rather than just a single exemption of $5.3MM. To take advantage of portability, the surviving spouse must elect portability in a timely filed estate tax return.
If Andy Rooney could have elected portability when his wife died in 2004, his estate would have incurred NO estate tax. Unfortunately for Mr. Rooney, the concept of portability was not available at that time. In recent years, portability has completely changed the estate planning approach for couples with combined assets less than $10.6MM
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