The Internal Revenue Service has issued guidance on electing portability of the unused exclusion of a deceased spouse. Notice 2011-82,
which was issued on September 29, 2011, reminds estates of deceased
married individuals to file a Federal estate tax return to transfer the
decedent's unused gift and estate tax exclusion amount to the surviving
Tax practitioners have been achieving portability with estate planning techniques (credit shelter dispositions) for decades, but portability didn't become a part of the tax laws until the Tax Relief Act of 2010,
which was signed into law on December 17, 2010. This new feature
allows the estates of predeceased spouses to pass any unused exclusion
amount (currently $5 million) to the surviving spouse.
example, a decedent who used $3 million of his $5 million exclusion
amount can pass the remaining $2 million on to his surviving spouse.
This will increase the surviving spouse's exclusion amount from the
usual $5 million to $7 million, assuming the surviving spouse does not
Since portability can only be elected on a timely-filed
estate tax return of the predeceased spouse, a failure to file the
return could result in loss of the opportunity. Even if the predeceased
spouse's estate is not large enough to require a Federal estate tax
return (Form 706), executors should consider filing a return solely to
make the portability election.
The portability election is
available to estates of decedents who died after December 31, 2010.
Given that the Federal estate tax returns are due 9 months from the date
of death, the first estate tax returns for estates that are eligible to
make the portability election were due as early as October 3, 2011. If
an estate is unable to meet this deadline, it can request an automatic
six-month extension by filing Form 4768.
The IRS is working on
regulations to provide further guidance on the portability election and
is looking for input from the public. Specifically, the IRS is asking
for comments on the following issues:
To be considered, comments must be submitted in writing by October 31, 2011, using one of the following ways:
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About Jeramie Fortenberry
I am an attorney
practicing trust and estate law in Mississippi, Alabama, and Florida. I
offer free telephonic consultations to clients with questions about
probate and estate planning. Get yours today.
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