Familiar with the acronyms QDRO, CSSA, and OSC? Here's a new one for matrimonial lawyers to add to their lexicon: DSUE (pronounced d-sue). And no, it has nothing to do with suing and everything to do with a new concept in the estate and gift tax law called "portability."
It is essential that attorneys who prepare prenuptial and postnuptial agreements understand the concept of "portability" and how it works. Each individual can pass an unlimited amount free of federal estate and gift taxes to a spouse or charities, but may pass only a limited amount to other persons, including children, free of transfer taxes. While commonly referred to as the estate tax exemption, this limit is technically known as an individual's "applicable exclusion amount."1 With the introduction of portability, the applicable exclusion amount is now a combination of (i) an individual's "basic exclusion amount" ($5 million as indexed annually for inflation; $5,250,000 in 2013),2 and (ii) if applicable, the unused basic exclusion amount of his or her last deceased spouse (referred to as the spousal unused exclusion amount or DSUE Amount).3 Individuals may utilize the applicable exclusion amount at death or by making gifts during their lifetime.
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