An essential part of effective estate planning is maximizing the benefit of the federal lifetime gift tax exclusion to transfer more wealth to your beneficiaries – estate and gift tax-free.
When a taxpayer dies before the full exclusion is reached, the surviving spouse is typically entitled to a “portability election” that allows him or her to use the deceased spousal unused exclusion (DSUE) amount within a certain amount of time after the decedent’s death.
Effective July 8, 2022, the IRS has extended that time from two years to five years for estates that are not required to file an estate tax return. This change more than doubles the timeframe that the DSUE amount is available for application to the surviving spouse’s subsequent transfers, either during life or at death.
This simplified method for filing a portability return will help more taxpayers receive the DSUE benefit without a private letter ruling. Generally, the method is available if all of the following criteria are met:
- The decedent was survived by a spouse and died after December 31, 2010.
- The decedent was a citizen or resident of the U.S. on the date of death.
- The executor is not required to file an estate tax return (based on value of estate and adjusted taxable gifts).
If the executor is required to file an estate tax return, the election must be made on a timely filed return.
For more information on maximizing the benefit of the DSUE under the new IRS rules, please contact Lisa Rispoli, Trust & Estate Services Leader.