Your $10,000,000 Portability Exemption
May Be in Peril of Being Lost
If You are a Surviving Spouse of Someone who Died in 2011, this Information May be Vitally Important
In December 2010, Congress passed legislation that increased the Federal Estate Tax Exemption to $5 million for an individual or $10 million for a couple. This law is in effect for the years 2011 and 2012. Beginning January 1, 2013, the Federal Estate Tax Exemption is scheduled to go back to $1 million, unless the House, the Senate, and the President agree on a compromise as they did in 2010. This makes proper planning during life and after death vitally important.
As part of the 2010 legislation, Congress enacted a new law called “Portability”. Under the new law, any Federal Estate Tax Exemption that remains unused as of the death of a spouse who dies in 2011 or 2012, is generally available for use by the surviving spouse and can be added to his or her own $5 million exemption for taxable transfers made during life or at death, assuming the surviving spouse does not remarry. Under prior law, the exemption of the first spouse to die would be lost if not used.
The IRS recently released instructions concerning Portability that you should be aware of. The IRS stated that if the surviving spouse desires to utilize the unused exemption of the deceased spouse, the Executor of the deceased spouse’s estate must timely file a complete IRS Form 706 to allocate any unused exemption to the surviving spouse, even if no tax is due and even if no return is otherwise required to be filed. The failure to file a timely and complete IRS Form 706 will effectively prohibit the surviving spouse from using the deceased spouse’s unused exemption. IRS Form 706 is due nine (9) months from the date of death so time is of the essence.
If you had a spouse die in 2011, you need to immediately consult with the attorney who handled the settlement of the estate. If we can be of assistance, please do not hesitate to contact us.