IRS offers extensions to declare portability

Portability is an estate tax provision that allows married couples to combine their estate tax exemption. That exemption is currently close to $11 million between both spouses, but many executors in North Carolina may not understand that it isn’t given automatically. To take advantage of the portability provision, a surviving spouse must tell the IRS that it is being used before they pass away.

However, the IRS has granted executors a two-year window to file an estate tax return upon the first spouse’s death to allow a portability election. Estate executors for those who have died since 2011 have until Jan. 1 to transfer any unused portion of a deceased spouse’s exemption. If an estate is worth less than the exempt amount, however, it may not be necessary to make use of this provision.

Once the Jan. 1 deadline passes, there will be only the two-year window in which to elect portability. Those who miss that window may ask for an IRS private letter ruling asking for Sec. 9100 relief. However, this request will likely be denied if the first spouse failed to file a required tax return. Those who live in states with their own estate tax are less likely to encounter this issue.

An individual may have many options when it comes to accounting for estate taxes. For example, it may be possible to put assets in a trust or make gifts before passing away. Portability may also help to ease a spouse’s potential tax burden by combining both each spouse’s personal exemption into one larger amount. Those who may want to learn more about their possible estate tax obligations may wish to consult with an attorney.