Hook Law Center Estate Planning Attorney Discusses Estate Tax Portability And How To Claim It

Virginia Beach, VA (Law Firm Newswire) September 24, 2013 – Estates that do not use their entire estate tax exclusion allowance may pass on the remainder to a surviving spouse, but the process is not automatic.

Called “portability,” the rule was made permanent as part of the American Taxpayer Relief Act of 2012 (ATRA). But Virginia estate planning attorney, Andrew Hook, cautions that an estate tax return must be filed in order for the surviving spouse to claim portability.

“Not every estate is required by law to file an estate tax return,” Hook said. “But the IRS has made it clear that the portability election may be made only after properly and timely filing an estate tax return. No special statement or checking any box is necessary, but the return must be filed. The due date is nine months from the decedent’s date of death, but an automatic six-month extension is available.”

For 2013, the first $5.25 million in value of a decedent’s estate – the “exclusion amount” – is not subject to federal estate taxes. The figure is indexed to inflation for future years. If the decedent’s estate is valued under the exclusion amount, the difference between the two figures is “portable” to their surviving spouse. Thus, when the surviving spouse later dies, their estate is eligible for the standard exclusion amount for that year plus the amount left unused by the earlier estate.

“Prior to the portability rule, people could often achieve similar results, but it took careful advance planning, usually involving creating trusts and re-titling property,” Hook added.

Any rule Congress makes may be undone, and some may wonder if the portability really is permanent.

“Given that alternative strategies exist, and the rule really just makes portability more convenient, I see little incentive for Congress to repeal this law,” said Hook. “I believe portability is here to stay.”

Estate tax returns can be complex and difficult to complete accurately and on time by a grieving spouse, particularly if they had little to do with the couple’s finances.

“Following the death of a loved one – or preferably before – I recommend consulting an experienced estate planning attorney, even if you think you have no chance of being subject to estate tax,” Hook cautioned.