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IRS Gives More Time to Elect Portability

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Posted on Jun 30, 2017 | Share this post: Like Us on Facebook Join Us on Google Follow Us on Twitter

There was good news from the IRS this month.  They announced they’re giving surviving spouses a break.

People who recently lost a spouse now have some extra time to save on estate taxes.  As you may know, each individual has a $5.49 million gift and estate tax exclusion (lifetime gifts and the value of the estate at death up to that amount are excluded from estate tax).  Married couples can double the exclusion amount. A “credit shelter” or “bypass” trust used to be needed to take advantage of the deceased spouse’s unused exclusion (aka “DSUE”).  That technique is still used today, but people have another option, called “portability.” Back in 2011, married couples were given the ability to “port” their spouse’s unused exclusion by simply filing an estate tax return, which is due 9 months after the date of the first spouse’s death. (Extensions are allowed.)

Apparently, many people forgot, didn’t know about it, changed their minds, or otherwise blew it, and the IRS has been swamped with requests to extend the filing deadline.  So the IRS is being nice (probably mostly to lighten their workload, but hey, we’ll take it) and offering “continuing relief” for taxpayers.  A new Revenue Procedure extends the time for filing an estate tax return only for portability purposes — an estate tax return cannot otherwise be required.  For surviving spouses whose spouse died after December 31, 2010, they must file an estate tax return by January 2, 2018.  For more recent deaths, the time for filing is extended from 9 months to 2 years after the date of death.  You would still file a “complete and properly prepared” 706 form, but the top of the return must say: “FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).”

Although estate taxes might go away (as Republicans have promised), they also could go higher (Democrats have advocated a decreased exclusion of $3.5 million/$7 million for married couples).  Truth be told, Congress is always looking for ways to solve its spending and debt problems, so even if the “death tax” opponents prevail for now, the tax could easily rise again.  Having a little extra exclusion could never be a bad thing.