Richard Morgan, Morgan and Disalvo.

This topic is on portability election. Prior to 2010 temporarily in 2013 permanently, each spouse would get an exemption from the estate tax. You need to take particular actions in order to use that exemption of first spouse to die, and if you didn’t take those actions by using a trust or have those assets pass to a non-spouse, non-charity, you didn’t actually use the exemption. It just went poof and went away.

In 2010 temporarily in 2013 permanently, we now have something called a portability election. That allows the executor of the first spouse’s estate to elect to port or transfer over any unused estate tax exemption from the first spouse to die over to the surviving spouse, which now leaves open the possibility of passing all your assets to the surviving spouse outright without having a tax problem. In order to get that portability election to get that exemption passed over from the first spouse to the second spouse, you need to file a timely estate tax return.

Now, there was a question about how soon you need to file. Here’s the bottom line today, if you are required at the first spouse’s death to file the estate tax return or the death tax return, it’s an IRS form 706, if you’re required that means the gross estate, the total amount of assets without considering debt is more than the exempt amount that year, then you’re required to file it. In that case, to do the portability election, it must be filed within nine months of the person’s date of death. You could have one six month extension if the extension was requested on time, so the maximum is 15 months.

If you are not required to file that return, your gross estate at the value of all your assets is less than the exempt amount, then you are not required to and the IRS has more power to give you more leeway on timing.

In 2017 under revenue procedure 2017 desk 34, the IRS gave us a gift and they said that as long as you follow the rules in that revenue procedure, you have up to two years after someone dies to make that election. You have that two year window if you’re not required to file the return. And since today, the exemptions are quite large, probably 99% or more of the population will not be required to file that return at the first death because of that, most people have two year window to file that return to make sure you get that first exemption from the estate tax.

Richard Morgan, Morgan and Disalvo.