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IRS Provides Relief for Some Small Estates to Elect Portability

 

The Internal Revenue Service just released Revenue Procedure 2014-18, which provides relief for surviving spouses who missed the opportunity to take advantage of portability under the new estate tax law. Under the new procedure, taxpayers who meet certain criteria can simply file an estate tax return to elect portability.

On January 27th of this year, the Internal Revenue Service issued Revenue Procedure 2014-18, which allows a simplified method for certain small estates that did not timely file an estate tax return to still elect portability. Portability is part of the federal estate tax that allows a surviving spouse to use any remaining estate tax exemption of a deceased spouse. It is like a get-out-of-jail free card for those who did not do estate tax planning as part of their estate plan.

The new Revenue Procedure has the following criteria: 1.) The decedent must have had a surviving spouse; 2) The decedent must have passed after Dec. 31, 2010 and on or before Dec. 31, 2013; 3) The decedent must have been a U.S. citizen or resident at death; 4)  The executor must not have been required to file an estate tax return under IRC Section 6018(a); and 5) The executor must not have filed an estate tax return within the time prescribed for filing to elect portability.

If the taxpayer meets the foregoing criteria, a portability election can be made for the estate by filing a Form 706 estate tax return no later than Dec. 31, 2014.  The return must be properly completed in accordance with the Temporary Treasury Regulations for returns filed to elect portability and must indicate that it’s being filed pursuant to the new Revenue Procedure.

However, there are several pitfalls to relying on portability. Chief among them is that portability does not protect you or your family from Minnesota Estate tax which affects estates as small as $1 million. To learn more about the pitfalls of portability, click here. To learn more about estate tax planning, visit our video tips page here.