IRS Extends “Portability” Filing Deadline for Surviving Spouses

The Internal Revenue Service has extended the deadline to file estate tax returns and make a portability election to benefit the surviving spouses of married individuals who died during the first six months of 2011.

It would be a gross understatement to say that 2010 and 2011 were, undoubtedly, tumultuous years in the world of estate law. While we can’t expect anything less from 2012 (that battle simply hasn’t occurred yet and likely will be another end-of-year struggle), the “developments” wrangled in 2010 and 2011 are still making news into 2012.

The recent news: The IRS has extended the deadline for the estate tax “portability” election for some surviving spouses. Apparently, the new laws are still largely unknown to the public.

For the surviving spouses of those who died within the first six months of 2011, so long as the decedent’s estate was valued at less than $5 million, there is now an extension to file for portability. Now, even if the executor of such estate didn’t file the return within the first 9 months, or even file for a 6 month extension within that time, they have all 15 months to file. However, to comply they need to properly file both the extension Form 4768 and the estate tax form itself, Form 706. Effectively, this means that the first 2011 portability elections become due on Monday, April 2, 2012.

“Portability,” as you may be aware, is the new ability for a surviving spouse to pick up and carry along, as it were, the unused estate tax/gift tax exemption of the decedent. For 2011 that meant $5 million, less whatever of that exemption had been used as part of the lifetime gift tax exemption, can be passed along to a spouse who would have a $5 million exemption of their own for a total combined exemption of as much as $10 million.

This is not an automatic ability, however, and so proper and timely filing is essential. It may not seem that important today, especially if $10 million seems like a lot, but it is a simple step to plan for a future you can’t foresee (that’s why you’re planning in the first place, is it not?) and a future where this may make the difference.

Clearly, the IRS wouldn’t be offering such extensions if they felt that portability was properly understood and fully utilized; in fact, it likely means that the new laws are not yet understood and so it’s worth getting the word out.

Reference: Accounting Today (February 17, 2012) “IRS Extends Deadline on Estate Tax Portability Election

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