IRS Extends 2011-2013 Portability Deadline
So as to provide a little more time for surviving spouses to elect portability on their tax return and to allow them to use their deceased spouse’s unused federal estate tax exemption, the Internal Revenue Service (IRS) has extended the portability deadline for filing an estate tax return for those decedents who passed away in 2011, 2012 or 2013 to December 31, 2014.
To elect portability means that a married couple can in effect combine their available exemptions. That move could potentially save a family a significant amount of money when the second spouse dies. For example, if one spouse died in 2012 with an estate worth $2 million, all of which had been allocated to a Credit Trust, the surviving spouse could then file an estate tax return and elect portability. By doing so, that spouse would then gain an additional $3 million exemption, because the exemption in 2012 was $5 million, and the decedent used up $2 million by funding the Credit Trust.
Since a $2 million estate was not taxable in 2012 and no estate tax return would be required for any other reason, a number of families may have missed the nine-month deadline opportunity to file a return to elect portability. That is why the IRS extended the deadline for such returns until the end of this year. Doing so will allow surviving spouses to examine the potential benefits of requesting the additional exemption.
For many families, filing an estate tax return in order to request portability could be a great investment, especially in those cases where a survivor’s assets is likely to continue to appreciate significantly enough to create a taxable estate at some point. There is also the possibility that the government could reduce estate tax exemptions in the future, although that seems unlikely, given that the current exemption is increasing annually. In any case, it could be worth a second look.
