There’s good news for estates that may have previously missed the opportunity to file Form 706 for a deceased spouse and preserve their unused estate tax exclusion. The IRS recently released a simplified method of relief for those who missed the filing deadline. The new procedure is available to estates of spouses who passed away as early as January 1, 2011.
An executor of an estate is required to file an estate tax return (Form 706) if the value of the decedent’s lifetime gifts and assets held at date of death are over the current lifetime exclusion amount. For 2017, this amount is $5,490,000. If this threshold isn’t met, a return is not required. However, if the deceased individual was married, any unused estate tax exclusion can be transferred (or ported) to the surviving spouse for use against future taxable gifts, or the estate tax due at the death of the surviving spouse. This concept is known as portability. In order to elect portability and preserve a deceased spouse's exclusion for use by their surviving spouse, an estate tax return must be filed for the deceased spouse. This returns includes a calculation of the remaining, unused exclusion known as the Deceased Spousal Unused Exclusion or DSUE.
Under Revenue Procedure 2017-34, qualified estates have until January 2, 2018 or two years from the decedents date of death, whichever is later, to file Form 706 and make the portability election. Qualified estates are those that were otherwise not required to file a Form 706 due to the size of the estate and where the decedent (i) was survived by a spouse, (ii) died after December 31, 2010 ,and (iii) was a U.S. citizen or resident on the date of death. If an estate is a qualified estate, the executor may file a late estate tax return on Form 706 by the extended deadline and simply disclose that it’s being filed pursuant to the revenue procedure. There is no user or filing fee required to obtain this relief.
The information provided in this alert is only a general summary and is being distributed with the understanding that Plante & Moran, PLLC, is not rendering legal, tax, accounting, or other professional advice, position, or opinions on specific facts or matters and, accordingly, assumes no liability whatsoever in connection with its use.