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Surviving Spouses: Estate Tax Portability Relief

Posted on: April 13th, 2015
portability deadlineEstate tax portability allows a surviving spouse to use their deceased spouse’s unused estate tax exemption. Decedents who pass away on or after January 1, 2014 must file proper paperwork within 9 months of the date of death in order to elect portability. The required document is a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return; a surviving spouse will not be able to elect portability without filing this document before the deadline or within six months thereafter if an extension is granted. 

The American Institute of CPAs (AICPA) recently submitted a recommendation to the Department of the Treasury and the Internal Revenue Service. The letter suggests that the 9-month deadline for portability election be permanently extended to 15 months. The AICPA also requested a streamlined version of the Form 706 as a short Form 706-EZ. The existing Form 706 includes 53 pages of instructions plus a 31 page form. 

The estate tax exemption is $5.43 million for the 2015 tax year. A surviving spouse could enjoy significant benefits if an unused portion remained from their deceased spouse. An executor does not benefit either way. Currently an executor is the only individual who can make the election on behalf of the surviving spouse. If an executor fails to submit a Form 706 in time or at all (filing the form is not required by the estate), the surviving spouse loses their eligibility. Instead, the AICPA recommends the surviving spouse have the power to complete the Form 706. This would allow the surviving spouse the freedom, flexibility, and peace of mind that their portability election can be managed independently.

Whether the federal government will accept and employ the AICPA’s recommendations remains to be seen. An estimated ruling date has not been released as of this writing.

Estate tax is just one of the many tax issues to consider when settling an estate. Regular reviews of one’s estate plan and comprehensive tax planning can help prevent tax burdens later on. Until a potential deadline extension is confirmed, be prudent with the current estate tax portability deadlines and reflect interests clearly to the executor. Discuss more with an attorney and learn more about eligibility for electing estate tax portability.
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