Portability is a big deal. It authorizes executors of estates of decedents dying after December 31, 2010, to elect to transfer any unused exclusion to the surviving spouse. The amount received by the surviving spouse is called the deceased spousal unused exclusion, or DSUE amount. The surviving spouse may apply the DSUE amount received from the estate of his or her last deceased spouse against any tax liability arising from subsequent lifetime gifts and transfers at death.
But Portability doesn’t happen automatically, a timely filing of the estate tax return (IRS Form 706) must be made!
In an uncharacteristically generous moment, the IRS granted an extension allowing a surviving spouse to elect “portability” of their DSUE amount, even if the death occurred in 2011, 2012, or 2013, provided an estate tax return is filed by December 31, 2014.
Who should consider filing Form 706 to make the election? Any surviving spouse of a decedent who died in 2011, 2012 or 2013 where there is DSUE amount and the surviving spouse’s estate is $3,000,000 or more. Filing the 706 before December 31, 2014 will transfer the DSUE to the surviving spouse. Doing this will permit the surviving spouse to use the DSUE amount during his or her life, thus reducing (and often eliminating) gift and estate tax issues for the survivor and the survivor’s estate.
Much of estate planning involves creating choices. Having options to let you and your beneficiaries make good decisions based on the circumstances at the time of incapacity or death is an important part of planning.
Time is running out to take advantage of the Portability Extension. Review your clients’ files, talk to your friends, there’s a lot of DSUE hanging around from 2011, 2012 and 2013 that can be transferred, but time is running out!