{"id":939,"date":"2017-12-04T19:23:19","date_gmt":"2017-12-04T19:23:19","guid":{"rendered":"https:\/\/www.jacksonwhitelaw.com\/arizona-estate-planning\/?page_id=939"},"modified":"2022-08-03T23:04:09","modified_gmt":"2022-08-03T23:04:09","slug":"portability-estate-planning","status":"publish","type":"post","link":"https:\/\/www.jacksonwhitelaw.com\/arizona-estate-planning\/blog\/portability-estate-planning\/","title":{"rendered":"Portability in Estate Planning"},"content":{"rendered":"

Introduction<\/h2>\n

Estate planning involves taking inventory of what you own and preparing for those assets to be transferred to others in the proper way after you die. Debts, money, accounts, and insurance plans all make up your estate. If your estate is worth more than a certain amount, it will be subject to an estate tax<\/a>.<\/p>\n

Before portability was introduced, estate planning for married couples involved using credit shelter or bypass trusts. These would hold the remaining tax exclusion for the deceased spouse\u2019s estate and prevent the assets from further tax once the surviving spouse passed on. If the estate tax exclusion of the deceased spouse wasn\u2019t used fully, this amount would be lost.<\/p>\n

But portability allows for this unused DSUE (deceased spouse\u2019s unused exemption) amount to transfer to the living spouse. The IRS has issued rules about the portability election related to federal estate tax exemption. If you\u2019re married, it\u2019s important to understand how the rules can impact your current estate plan. Widowers and widows should also find out how the rules can affect the estate of their deceased spouse.<\/p>\n

The Portability Election<\/h2>\n

The portability election is the surviving spouse\u2019s right to claim their deceased spouse\u2019s unused portion of their estate tax exemption, to add it to their own exemption amount. In 2018, the projected amount that can be left to your heirs free from federal estate tax is roughly $11 million per married couple. This projection, based on Bloomberg BNA estimates<\/a>, means $5.6 million per spouse.<\/p>\n

In order to make this portability election properly, the living spouse should file their federal estate tax return in a timely manner. This is also called the \u201cForm 706<\/a>\u201d or \u201cUnited States Estate Tax Return.\u201d<\/p>\n

This form is due between the date of the deceased spouse\u2019s death and nine months after. You can, however, file for a six-month extension with a Form 4768<\/a>, before or on the estate tax return due date.<\/p>\n

What Prompted these New Rules?<\/strong><\/h3>\n

This change in rules came because so many individuals missed the portability election deadlines, overwhelming the IRS. Before that, executors had just nine months for the deadline to elect portability on their estate tax return. And a lot of them didn\u2019t even know this election existed for them, particularly if they were dealing with an estate they didn\u2019t know qualified.<\/p>\n

As soon as these people realized they had missed the date and still wanted relief, they would need to go through the time-consuming, expensive process of a PLR<\/a> (or private letter ruling). Due to so many requests for relief, the IRS had to make the rules simpler.<\/p>\n

Specifications for the New Rules<\/h3>\n

The new rules for 2017-34 Revenue Procedure come with a few specifications you should be aware of:<\/p>\n