At the end of 2010, Congress passed legislation authorizing the transfer of unused spousal estate/gift tax exemption to a surviving spouse. As with most tax laws, the devil was in the details, and it was left to the IRS to work out the details. After years of fits and starts, backtracking, and plugging holes, the IRS has finally surrendered. The IRS now provides taxpayers with a simplified method to make a portability election.1 Taxpayers who qualify for this new simplified method will be able to elect portability of a Deceased Spouse’s Unused Exemption (“DSUE”) up to five years after the decedent’s date of death.
To qualify for the new portability election procedure, the estate must meet the following requirements:
(1) have a surviving spouse;
(2) passed away after December 31, 2010;
(3) have been a United States citizen or resident on the date of death;
(4) not have been required to file a Form 706;
(5) not have previously filed a Form 706 for their estate.
All that is required to make the election under this new procedure is to:
(1) file a Form 706;
(2) make the portability election on Form 706;
(3) state on Form 706 that the return is “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010(C)(5)(a).”
With the estate tax exemption set to reduce by half on January 1, 2026, it might be a good time to take another look at the estate planning of anyone who had a spouse die within the last five years.
For more information about this change and other estate planning matters, contact John Clough at jclough@pselaw.com or 937.223.1130.
Regardless of the size or complexity of your estate, our experienced team will work with you throughout every stage of life to assist you and your family to create a customized plan that meets your needs.
1Revenue Procedure 2022-32; Section 2010(c)(5)(A)
