Are you an executor for an estate created in 2011, 2012, or 2013? Then you may benefit from a procedure that extends the due date for making a portability election on an original estate return. Here’s what you need to know.
Portability has to do with the federal estate tax exclusion, or the dollar amount of assets that are exempt from federal estate tax. Each estate can claim an exclusion to shelter assets from the tax.
Prior to 2011, when portability was introduced, any unused portion of an estate’s exclusion died with the estate. That meant married couples couldn’t take advantage of “leftover” exclusion amounts to reduce the tax on the surviving spouse’s estate.
Now portability is a permanent part of estate tax rules, making it possible to transfer all or part of an unused exclusion between spouses. You do that on Form 706, the federal estate tax return. The catch: Normally, you have to file the return and the election by the nine-months-after-death due date, even if the total value of the estate is less than the exclusion.
For example, say you were the executor of an estate created in 2012. The exclusion for that year was $5,120,000. When the total asset value of a 2012 estate was less than that amount, a federal estate tax return wasn’t required — and so you might not have filed one.
If that’s the case, you missed a chance to make the portability election — but all is not lost. Under a recent IRS revenue procedure, estates created during 2011, 2012, and 2013 that meet certain requirements have until December 31, 2014, to file an original Form 706 and make the election.
As a result, you have a second chance to elect portability. We urge you to contact us to learn about this valuable tax planning opportunity.