IRS Ruling Includes Estate Tax Exemption Portability Relief

ScottHulse Issues Guide to Ruling Which Includes Retroactive Benefits for Some Widows and Widowers

  On January 27, 2014 the IRS announced a simplified procedure to provide retroactive tax relief to certain individuals whose spouses died after December 31, 2010 and before January 1, 2014. ScottHulse PC would like to make you aware of a window of opportunity for widows and widowers to take advantage of a recent Internal Revenue Service (IRS) change that may allow them to qualify for a retroactive tax benefit. This benefit also applies to same-sex married couples.

The portability election under the Internal Revenue Code Section 2010(c)(5)(A) allows for the estate of the first spouse to die to retroactively carry over unused federal estate and gift tax exemptions between spouses retroactively. A deceased spouse’s unused exemption (DSUE) amount can be retroactively added to the surviving spouse’s own exemption without a penalty or fee. If a married couple takes advantage of the portability election, the estate of the surviving spouse can add the DSUE amount from the deceased spouse, with some restrictions, to the surviving spouse’s own exemption amount.

While this exemption portability benefit was made available to United States citizens January 1, 2011, many individuals did not take advantage of “porting” the exemption.

The retroactive relief ruling assists those who were unaware of portability, or those who did not believe the surviving spouse would ever have assets valued at more than the current $5.34 million exemption from the estate tax, and also those same-sex couples who were recognized as spouses after a 2013 Supreme Court decision. Consequently the IRS’ new ruling allows qualified taxpayers to make an effective retroactive portability election simply by filing an estate tax return (Form 706), even if no tax is due, in accordance with the procedures set forth by the IRS.

For more detailed information, visit our Estate Planning, Probate & Asset Protection practice page to download a PDF of Portability Relief: A Guide for Widows and Widowers, which answers frequently asked questions regarding portability and the retroactive extension.