New Portability Rules: A Cure for the Incomplete Estate Planning

July 2012Articles Journal of Accountancy
Many CPAs are involved in representing estates of decedents who died in 2011 and 2012. In dealing with such estates, it is important to focus on the new Code provisions allowing portability of the decedent’s unused lifetime gift and estate exclusion amount to the surviving spouse. A failure to do so can result in the loss of a significant estate and gift tax benefit for the surviving spouse that could easily be overlooked. This article focuses on the new portability election and the planning opportunities and pitfalls associated with making the election and the potential consequences of failing to do so.

To obtain the benefits of portability, estates must file Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, even if the estate’s total assets are below the $5 million (2011) or $5.12 million (2012) exclusion amount. Furthermore, the possible reduction of the federal exclusion, possibly to $1 million for decedents dying in 2013 and later, should be addressed. Executors of estates of decedents who leave a surviving spouse must be carefully counseled during the months after the decedent’s death on a number of issues involving portability.

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