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Relief from IRS: Portability of Lifetime Tax Exemption Extended

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There is good news for those who may have missed a federal portability election.

The Internal Revenue Service (IRS) has extended the deadline for electing portability of a deceased individual’s unused estate tax exclusion amount. Effective July 8, 2022, the deadline to file the portability election has been extended from two years to five years after the decedent’s date of death.

In 2022, the Federal lifetime estate and gift tax exemption is $12.06 million per person. Prior to 2011, this exemption could only be used by the decedent. After 2011, the Internal Revenue Code was amended to allow a deceased spouse’s unused exemption amount (DSUE) to be transferred (e.g., ported) to a surviving spouse, and applied to the surviving spouse’s transfers during life or at death.

Many surviving spouses, however, failed to make a timely election on an estate tax return. Historically, the IRS provided relief to such taxpayers first through Private Letter Rulings (“PLRs”) and then by Revenue Procedure 2017-34 providing a two year period from the decedent’s date of death.

This recent IRS procedure extends the deadline to file the portability election to five years. This extended time period is an important benefit, allowing additional time for trust and estate planning, tax planning and trust and estate administration. Depending on the deceased spouse’s unused exemption amount, there is an opportunity for effective planning to protect up to $12.06 million from federal estate taxes.

For counsel to assist you and your family in effectively planning and protecting your estate, please contact us or call us at 781-235-5500. Our attorneys in the Private Client Services practice are happy to answer any questions you may have to help you with trust and estate and tax planning matters or other legal matters.

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