First Due Dates in October for Electing Portability of Estate Tax Exclusion

10/1/2011 | Written by: Karen Reed, EA

An important deadline this month applies to the estates of taxpayers who died in January of this year. The 2010 Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act, signed into law last December, includes a new provision for “portability” of the estate tax exclusion amount between spouses. Beginning January 1st of this year, when one spouse predeceases the other, an election can be made to allow the surviving spouse to add the deceased spouse’s unused exclusion amount to his or her estate’s exclusion amount. This allows a married couple to exclude up to $10 million from estate tax when both spouses die within the specified period.

The portability election is available only to the estates of taxpayers dying after December 31, 2010, and before December 31, 2012. A timely filed estate tax return (Form 706) for the predeceased spouse’s estate is required to pass on the unused exclusion amount to the surviving spouse, even if there is no estate tax due. While there are no special entries to make or boxes to check on the form to make the election, an estate that chooses not to allow the surviving spouse to claim the decedent’s unused exclusion amount must indicate so by attaching a statement to the return, or including the statement “No Election Under Section 2010(c)(5)” at the top of the first page of Form 706.

Since an estate tax return is due nine months after the date of death of the taxpayer, the first due dates occur this month for filing estate tax returns for estates eligible to make the new “portability” election for spouses. Estates that are unable to meet the deadline should file Form 4768 for an automatic six–month filing extension.