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IRS extends deadline for 'portability' election for 2011 deaths

February 20, 2012

You can't file joint estate tax returns, for reasons that are obvious on a moment's reflection. Because each spouse gets a lifetime exemption from estate tax, couples with estates over the exemption amount have tried to make sure each spouse has enough assets to use their exemption.

The estate tax enacted for 2011-2012 makes life simpler for these couples by allowing estates to elect to carry any unused exemption to the surviving spouse. You make the election on the dead spouses estate tax return.

That's great, but what if you don't realize you need the exemption. It's easy to imagine situations where a surviving spouse comes into a fortune and really wishes she had filed that Form 706. It's just as easy imagining a lawsuit against the executor who had only the deceased's double-wide to probate from the surviving spouse who wins the Powerball.

The trap is still there, but the IRS last week gave estates extra time to avoid it, even if they didn't extend their estate tax return. From the TaxProf: IRS Extends Deadline to File Estate Tax Portability Election

Link: IR-2012-24

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