Late Portability Election for Estates Extended to 5 Years
On July 8, 2022, the Internal Revenue Service issued a revenue procedure (Rev. Proc. 2022-32) that allows certain estates to elect portability of a deceased spousal unused exclusion (DSUE) amount up to five years from the decedent’s date of death. This is an update from a previous revenue procedure that allowed certain estates to elect portability up to two years after the decedent’s date of death. If a deceased taxpayer doesn’t use their entire estate tax exemption, the excess may be made available for the surviving spouse to utilize for their gift and estate transfers through portability. For more information about portability and how it may affect estate taxes, please read our article, Estate Planning Discussion: What Is Portability and How Can It Affect You?
To take advantage of portability, the estate must generally file Form 706, U.S. Estate Tax Return, on a timely basis to make the election. However, if the estate is not otherwise required to file Form 706, this revenue procedure offers a streamlined process to elect portability on a late Form 706, and you now have up to five years to make the election. This election is made by the appointed executor of the decedent’s estate, which may not necessarily be the surviving spouse.
The current estate tax exemption in 2022 is $12,060,000 per person, or $24,120,000 for a married couple. Effective January 1, 2026, the exemption is set to fall to $5,000,000 per individual, or $10,000,000 for a married couple with an adjustment for inflation. By electing portability, the higher exemption will be preserved for the surviving spouse even when the exemption decreases in the future and may result in significant estate tax savings.
Please contact our Yeo & Yeo professionals to discuss how portability may apply to your situation. Our experts can help you navigate the election, especially in a tax environment with volatile tax law changes.