Effective July 8, 2022, the IRS now allows an estate to request a portability election up to five (5) years after a Decedent’s death (through Revenue Procedure 2022-32).
Portability elections allow a surviving spouse the ability to file a Federal Estate Tax return (Form 706) to preserve their spouse’s unused federal estate tax exemption (In 2022, this amount is $12.06 million per individual). By filing, the unused exemption of the deceased spouse (deceased spouse unused election or DSUE) is applied to the exemption of the surviving spouse or the surviving spouse’s estate.
Generally, a portability election is made nine (9) months after the decedent’s date of death. The IRS provides a simplified method for requesting an extension to file after the decedent’s death. That window to file was extended from two (2) to five (5) years. Certain requirements must be satisfied for the five (5) year extension to apply.
With the current exemption set to sunset in 2026 without further legislation, filing a 706 for portability at a spouse’s death may be beneficial even if the estates do not reach the current exemption amount. Applying the new IRS procedure, there is now the benefit of an additional three (3) years to do so.