Portability elections allow a surviving spouse to apply a deceased spouse’s unused federal gift and estate tax exemption amount toward their transfers during life or at death. The 2020 exemption is $11.58 million. For 2021, it will increase to $11.7 million.

To secure these benefits, the deceased spouse’s executor must have made a portability election on the estate tax return, which is due nine months after death with the option for a six-month extension. This deadline is often missed by estates that aren’t otherwise required to file a return because they don’t meet the filing threshold.

Automatic Extensions

The IRS made it easier for estates to receive an extension of time to file a portability election in 2017 by making the extension automatic for all deaths after 2010. This is true as long as:

• The deceased was a U.S. citizen or resident,
• The executor didn’t otherwise fail to file a required estate tax return,
• The executor files a complete and properly prepared estate tax return on Form 706 within two years of the date of death, and
• The following language appears at the top of the return: “FILED PURSUANT TO REV. PROC. 2017-34 TO ELECT PORTABILITY UNDER §2010(c)(5)(A).”

Choosing the Portability Election

The portability election is often a good option, but it isn’t always the best one. It is also important to consider non-tax reasons affecting the assets under a will or a living trust. Divorces and second marriages are both reasons that a person may want to divide assets in other ways.

The federal gift and estate tax exemption is currently at an all-time high. In 2025, it is scheduled to revert to pre-2018 levels. Fortunately, portability continues for those whose estates will no longer be fully sheltered, and additional planning should be considered.

Deadlines first

Should your spouse predeceased you, be sure that you consider the portability election. If you choose to take it, have your spouse’s estate file a portability election by the deadline. For questions about evaluating the potential benefit of this election, contact your trusted tax professional at Smolin Lupin.