IRS Expands Time to Claim Portability – Providing Tax Relief to Surviving Spouse and Their Families

From 2011, an individual has been eligible to carry over the unused portion of his or her deceased spouse’s Federal Estate Tax Credit, known as a Deceased Spouse Unused Election (DSUE) through a process known as Portability.  Portability carries the potential of a massive tax savings for the children of married couples.  Originally, a spouse was given nine (9) months to claim the DSUE, but in 2017, the IRS released Revenue Procedure 2017-34 which expanded the time to claim the DSUE to two (2) years, if the surviving spouse filed a letter with the IRS requesting an accommodation.

On July 8, 2022, by Revenue Procedure 2022-32, the IRS has expanded the time to file and claim Portability and further simplified the process.

What is Portability?

Much like how spouses may pool their income when filing a joint income tax return, married couples are permitted to combine their Lifetime Gift and Estate Tax Exemptions, currently $12,060,000 per person.  Portability allows the surviving spouse to claim the unused portion of the deceased spouse’s Lifetime Exemption and add it to the surviving spouse’s own, so long as a Federal Estate Tax Return (Form 706) is filed for the deceased spouse and Portability is elected.  Considering that the Federal Estate Tax is 40%, portability can result in significant tax savings by using the deceased spouse’s exemption.  Portability may provide an even greater benefit for any family that loses a loved one prior to January 1, 2026, when the exemption is reduced to one half of the current level.

What Changed?

Recently, the IRS published new rules in Revenue Procedure 2022-32.  In these rules, the IRS expanded the period of time in which the deceased spouse’s estate can file a Federal Estate Tax Return to elect portability from nine (9)  months after a death (or two (2) years after filing a request with the IRS) to five (5) years.   The IRS has announced that this change is retroactive, so the executor can claim portability, even if the original window has closed.   Additionally, no more letters requesting accommodations must be written, the executor only needs to file Form 706.

Is it too late to claim Portability for my Parents’ Estates?

Even if both members of the married couple have died, the executor of the second to die can port the first spouse’s DSUE to the second.  As an example, if the father passed away in 2018, and the mother passed away in 2020, the child, as the executor, could claim both their father’s and mother’s estate tax exemptions, instead of just their mother’s.  If the child has already paid the estate taxes on their mother’s estate and they are eligible to file for portability for their father, they could do so and claim a significant tax refund.

What are the requirements for this extension?

In order for the executor to claim Portability:

  • The deceased spouse must have been a US citizen
  • A Federal Estate Tax Return (Form 706) must not have previously been filed for the deceased spouse’s estate
  • The deceased spouse’s gross estate was under the tax filing threshold for the year of his or her death
  • Form 706 is filed claiming portability within five years of the anniversary of death

As always, the attorneys at Winne, Banta, Basralian & Kahn are here to serve you.

If you have specific questions pertaining to the information above please contact one of the attorneys in our Tax, Trusts & Estates Department listed below.

Co-Chairs of the Tax, Trusts & Estates Department

Martin J. Dever, Jr.

Jonathan Kukin

Partners of the Tax, Trusts & Estate Department:

Arthur I. Goldberg

Peter J. Bakarich, Jr.

Associates of the Tax, Trusts & Estate Department:

Doris Brandstatter     

Drew J. Ruzanski        

Marley A. Guerrera    

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