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New Estate Tax Exemption Portability Rule Requires Filing Of Estate Tax Return

On Behalf of | Oct 3, 2011 | Wills, Trusts, Estate Planning and Administration

In December of 2010, the long-awaited “fix” to the uncertainty as to the future of the estate tax was resolved (at least for 2011 and 2012). The estate tax exemption was set at $5million and the concept of “portability” was added to the Internal Revenue Code. Portability allows the transfer of any unused estate tax exemption of a decedent to his or her surviving spouse, thereby allowing a married couple to exclude up to $10million from the federal estate tax.

On September 29, 2011 the IRS announced that for married individuals dying after 2010 an estate tax return must be filed to pass along their unused estate tax exclusion amount to their surviving spouse. The only way to make the election is by timely filing an estate tax return on Form 706. As Form 706 is currently drafted, there are no special boxes to check or statements needed to make the election.

The IRS expects that most estates of people who are married will want to make the portability election, even those who are not required to file an estate tax return. The first estate tax returns for estates eligible to make the portability election (because the date of death is after Dec. 31, 2010) are due as early as Monday, Oct. 3, 2011 (nine months after the date of death). Estates that are unable to timely file a tax return may file for an automatic six-month extension of time to file, however, the extension request is due by the original due date of the estate tax return.

Joseph W. Kenny is a director and shareholder of Hamblett & Kerrigan, P.A. and practices in the areas of estate planning and taxation. He is also a Certified Public Accountant with certification as a Personal Financial Specialist. You can reach Attorney Kenny by email at [email protected].