The IRS has released a new simplified method for obtaining an extension of time to make a portability election. Making a portability election allows a surviving spouse to use the deceased spouse’s unused exclusion amount in addition to their own exclusion amount against their own lifetime gifts or at death.

Under the old rules the estate had two years from the date of death to make a portability election to “port” the deceased spouse’s unused exclusion to the surviving spouse. Under the new Revenue Procedure, an estate now has 5 years from the descendant’s date of death to make the portability election.

In order to make this election, the deceased must not have had a filing requirement for an estate tax return. For example, if the taxpayer were to pass away in August 2022 and he or she has an estate over $12,060,000, they are required to file an estate tax return, and the due date for that tax return will be nine months from the date of death plus an allowed six-month extension. Instead, if the taxpayer had an estate worth $5,000,000, then the taxpayer is not required to file an estate return unless the executor chooses to, in order to elect portability. If that is the case, the executor has until August of 2027 to prepare the Form 706. 

Reach out to your Ketel Thorstenson tax advisor for any questions.