Are You Aware Of The Estate Administration “Portability Feature?”

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 added a new “portability feature” for estates of decedents dying after 2010. This portability feature allows a surviving spouse to claim on her or his own federal estate tax return (Form 706) and federal gift tax return (Form 709) any applicable exclusion amount (the amount excluded from estate tax and gift tax) not used by her or his deceased spouse. However, a deceased spouse’s unused exemption amount may not be taken into account by a surviving spouse unless the personal representative of the deceased spouse files a timely complete estate tax return on which the amount is computed, and makes an election (a “portability election”) on the estate tax return that the amount may be taken into account by the surviving spouse. So even if your client does not have a taxable estate and no estate tax return is otherwise required to be filed, you will want to consider filing one for the purpose of making the “portability election” to preserve the unused applicable exclusion amount of the first spouse to die for the benefit of the surviving spouse.  At a minimum, you should consider advising your client of the option, and documenting any decision not to file an estate tax return in order to elect portability where no estate tax return would be otherwise required. We have included a sample letter that you may want to adapt to your own situation.  See also William T. Belcher’s article for additional information on this topic.