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Can I Trust in Portability to Save Taxes?

by Joseph A. Lewis, JD, CPA

The estate of a decedent who is survived by a spouse may make a portability  election. This provision of the American Taxpayer Relief Act reinacted a 2010 law, which has eliminated some of the need of using a trust to pass assets to a surviving spouse. It allows the surviving spouse to apply the decedent’s unused exclusion amount ($5,340,000 in 2014) to the surviving spouse’s own transfers during life and at death. The amount received by the surviving spouse is called the deceased spousal unused exclusion, or DSUE, amount. In general, the election must be made within nine months of the decedent’s death on the estate tax return, even if the estate is below the exclusion amount so that a return normally would not be required. Because many estates below the threshold did not file, the IRS provided a simplified method to obtain an extension of time to elect portability. This method only applies for an estate of decedent who died after Dec. 31, 2010 and on or before Dec. 31, 2013. The decedent must have been a U.S. citizen or resident on the date of death. In addition, an estate tax return must not have been required because the size of the estate was below the filing threshold. If these and other requirements are met, the IRS will grant an automatic extension to make the election on an estate tax return filed on or before Dec. 31, 2014. Taxpayers failing to qualify for this relief may request an extension of time to make the election by requesting a letter ruling.

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