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Why you should file that unneeded estate tax return

November 30, 2011

It seems odd. With the estate tax exclusion at $5 million -- higher than ever -- why is the IRS bracing for a flood of estate tax returns? Roberton Williams explains at TaxVox:

Portability—that is, retaining that unused exemption—has its price, though: A surviving spouse must file an estate tax return that specifically provides for portability on time, whether or not the estate owes any tax. Otherwise, the extra exemption is lost forever. (And, curiously, the decedent or the executor may specifically deny portability on the return, thus making it unavailable to the surviving spouse.)

Pity the poor executor who doesn't file an estate return for Old Elmer, who has only the assets in his double-wide. A year later his widow, Betty, wins the Powerball jackpot and falls over dead from the excitement. Failure to file that seemingly meaningless Form 706 for Elmer will add $1,750,000 or so to Betty's estate tax -- an amount likely to come out of the bottom line for Elmer's executor, or his lawyer, or the lawyer's malpractice carrier.

Sure, Congress could easily fix this. But that would require them to get something right, which we should never count on.

Tags: estate planning.estate tax.Roberton Williams.TaxVox.

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