KPM

Undue Influence

Portability Extension: New Rules For Estate Tax Planning

In the ever-changing landscape of estate and business taxation, it is crucial to stay informed about the latest developments and opportunities to optimize your financial planning. What is portability, and what implications does it have for estates and businesses?

Portability: Estate Tax Benefits

Portability is a powerful estate planning tool that offers married couples an opportunity to increase their individual estate tax exemptions. By allowing the surviving spouse to apply any unused portion of the deceased spouse’s estate tax exemption, portability effectively increases the total exemption available for the surviving spouse’s estate. This can lead to significant tax savings for your heirs and provide greater flexibility in your estate planning.

Understanding How Portability Works

To secure the benefits of portability, the deceased spouse’s executor must make a portability election on a timely filed estate tax return (Form 706). Generally, this return is due nine months after the date of death, with an option to request a six-month extension.

However, some estates that aren’t required to file an estate tax return may miss the portability election deadline. To address this, the IRS introduced Revenue Procedure 2017-34 in 2017, simplifying the process to obtain an extension for the portability election.

Extension Update: Revenue Procedure 2022-32

Recently, the IRS issued Revenue Procedure 2022-32, which brings a significant change to the extension process for electing portability. Under this new procedure, estates seeking an extension must make the request on or before the fifth anniversary of the deceased spouse’s death. This extension timeframe has increased by three years, providing estates with more time to file for the portability election.

The revised procedure comes with a significant advantage—it doesn’t require a user fee, unlike the previous private letter ruling process, which could incur substantial costs. This change aims to reduce the burden on the IRS resources, as numerous requests for extensions have been made under the previous rules.

Action Steps: Don’t Miss the Revised Deadline

If your spouse has predeceased you and portability could benefit your estate, it is crucial to make sure the portability election is made within the extended timeframe. To take advantage of this opportunity, the deceased spouse’s estate must file a complete and properly prepared estate tax return within five years of their date of death.

We understand estate planning and the subsequent tax implications can be complex. Our goal is to help you make informed decisions that can help safeguard your financial future. If you have any questions or concerns about portability and how it may impact your estate or business, please don’t hesitate to contact us.

Related Articles

Talk with the pros

Our CPAs and advisors are a great resource if you’re ready to learn even more.