2010, as part of the Job Creation Act, Congress allowed a surviving spouse to utilize a previously deceased spouse’s unused estate tax exclusion. This planning technique is known as “portability.” In 2012, as part of the American Taxpayer Relief Act, portability became permanent (or as permanent as any federal statute can be). One of the requirements for portability is that the first spouse to die (the “decedent spouse”) needs to file a Form 706 estate tax return and elect portability, prior to death; based on the value of the estate, filing an estate tax return would not otherwise be required. In other words, if the first spouse to die did not file a 706 prior to death, portability is lost.
At least that is what planners thought until the IRS issued Revenue Procedure 2014-18. In that Revenue Procedure, the IRS states that:
- If a decedent died after 2010 and before 2014,
- That decedent was a citizen or resident of the US upon his or her death,
- The decedent’s estate was not required to file an estate tax return based on the value of the estate (and taxable gifts), and
- The decedent’s estate did not file a timely return electing out of portability then, prior to December 31, 2014, the estate can file a form 706 and that return will be deemed properly filed.
