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Widows And Widowers Now Receive More Flexibility When Making Late Portability Elections by Sarah Gaymon, CPA

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Posted on July 13, 2022 by Sarah Gaymon

On July 8, 2022, the IRS released Revenue Procedure 2022-32, which provides a simpler method for estates with widows or widowers to elect portability of the deceased spousal unused exclusion (DSUE).

When a spouse dies with unused lifetime gift and estate-tax exclusion amounts, it is often a decision for the executor and the widow or widower to decide whether to file an estate-tax return to claim portability of the deceased spouse’s unused exclusion. This powerful election allows the surviving spouse to apply the decedent’s DSUE amount to his or her own transfers during life and at death and increase the amount of assets the surviving spouse can transfer without paying any estate or gift taxes.

Generally, the estate of a deceased spouse must elect portability of the DSUE amount on a timely filed estate-tax return (including extensions). However, many taxpayers are not aware of their ability to claim a portability election nor are all taxpayers required to file estate tax returns, whether due to adequate planning during life or to the fact that their gross estate and adjusted taxable gifts at the time of death were under the federal filing threshold, which is currently $12.06 million for each individual. Under previous law, if an estate did not have a tax-return filing requirement and it did not file timely to elect portability, the executor would have only two years to file for relief under simplified procedures or request an IRS private letter ruling, which would be expensive and time-consuming. This changes under the terms of the new revenue procedure.

Effective July 8, 2022, estates for decedents who were U.S. citizens or residents and who died after December 31, 2010, now have five years to claim simplified relief. Qualifying estates also must not have had an estate tax return filing requirement based on the value of the decedent’s gross estate and adjusted taxable lifetime gifts, and the executor must not have filed a timely estate-tax return. Estates meeting these eligibility requirements must take the following steps to claim the new relief provisions:

1.The executor must file a complete and properly filed estate tax return on or before the fifth anniversary of the decedent’s date of death, and

2. He or she must state on the top of Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).”

The IRS will no longer issue private letter rulings granting extensions of time to make the portability election before the fifth anniversary of the decedents death if the estate qualifies for the simplified method. For estates that are currently pending a letter ruling as of July 8, 2022, the Office of the Associate Chief Counsel will refund the user fee and close the ruling request so that the estate can now comply with the new revenue procedure.

Extending the deadline for estates to elect portability under the simplified method allows widows and widowers more time to plan for their own future tax efficiency when they did not take advantage of the portability election sooner.

Estate planning is an ongoing process subject to ever-changing rules and regulations.

Preserving and effectively passing wealth to surviving spouses and future generations, requires comprehensive planning under the guidance of trusted advisors and accountants to ensure the strategies you select are flexible enough to adapt to change and continue to meet your long-term needs and goals.

About the Author: Sarah Gaymon, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she works with entrepreneurs and high-net-worth families to plan for tax-efficient wealth preservation and multi-generational wealth transfers.  She can be reached at the CPA firm’s West Palm Beach, Fla., office at (561) 361-2050 or info@bpbcpa.com.