There is good news today for surviving spouses and their estate planners. The IRS extended the period for “portability elections” to five years after the death of the first spouse.
The portability election allows a surviving spouse to use any estate and gift tax exemption remaining from the first spouse to die. It is an important benefit as the exemption amount is $12.06 million for taxpayers that die in 2022.
Recently, Eide Bailly’s Chantal Stennerson explained the importance of filing a timely estate tax return after the death of a spouse to protect any unused exemption amount. To make the portability election, the surviving taxpayer must file Form 706, which is due nine months after date of death with a possible 6-month extension. Revenue Procedure 2017-34 allowed for an additional five months, or a total of two years, when filing the return for the portability election.
Today’s Revenue Procedure 2022-32 allows Form 706 to be filed on or before the fifth anniversary of the spouse’s date of death to make a portability election. Formerly, this could only be done by obtaining a costly IRS letter ruling. If a surviving spouse has missed the two-year window to file the election but is still in the five-year window, they may now be able to file Form 706 to elect portability under this new guidance. Taxpayers may also be allowed to recover estate taxes paid by filing Form 843 for a protective claim for credit or refund of tax before October 29, 2024 if the new portability rules could have been favorably applied.
Under current law, the estate tax exemption is scheduled to significantly decrease in 2026 from the current $12.06 million amount. This will likely increase the number of taxpayers subject to estate tax, making the portability election more valuable to more surviving spouses. To learn more about portability or other estate tax issues, contact your Eide Bailly tax professional or Eide Bailly Wealth Transition Services.