When you’re looking at the “portability” of up to $10,680,000 in tax-free estate money, you don’t want to miss a step. And if you do, you’d like the chance to make it up.
Combining the only two certainties in life, death and taxes, IRS Revenue Procedure 2014-18 details a time extension on an estate tax break for married couples that enables a surviving spouse to add to his or her own estate tax exemption that of their deceased spouse.
That means under current law one spouse can shift $5.34 million (with certain caveats) tax-free, of their deceased spouse’s exemption to their own, up to a tax-free maximum of $10,680,000.
This “portability” provision requires the estate’s executor to fill out and file IRS Form 706 and submit it within nine months of the spouse’s death, which in certain cases makes allowance for a six-month extension. Therefore, a person may have up to 15 months to elect to take this portability option.
The time frame on submitting an IRS Form 706 and the ability to seek an extension is not an element of law: it’s a matter of IRS regulations, and the IRS ruled the extension is available, though not open-ended.
This opportunity is actually easily overlooked. If the estate’s executor or attorney advising the family isn’t aware of tax break, and knowledgeable financial advisors aren’t consulted, it’s entirely possible that the form will not be completed and the potential tax advantages will be lost.
Even people who don’t believe they’ll ever exceed the tax-free amount may find that inflation or investments have pushed them into the category in which portability becomes a financial asset.
The six-month extension for the filing of IRS Form 706 comes into play in cases where carrying over the “deceased spousal unused exclusion amount,” or DSUE, is the single reason the form is being submitted, and if because of the estate’s size there was no requirement to file an estate tax return.
According to the Revenue Procedure, this exemption is applicable if:
The taxpayer is the executor of the estate of a decedent who:
(a) has a surviving spouse;
(b) died after December 31, 2010 and on or before December 31, 2013
(c) was a citizen or resident of the United States on the date of death
At the top of the IRS Form 706, this should be written: “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A)” at the top.
By all means research this yourself, but also talk to someone who knows and understands this development in estate taxes. People work all their lives to accumulate funds for themselves, their spouses, or their families. To the degree more of this money can stay in their hands, it’s a very good thing.
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