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Estate tax portability: file your estate tax return to take advantage

On Behalf of | Dec 8, 2011 | Estate Planning, Inheritance And Estate Tax |

Estate planning attorneys and their clients are keeping busy filing 2011 estate tax returns, despite the fact that the smallest number of estates in 75 years will actually owe any estate tax in 2011. The reason? Estate tax portability.

Portability, which came with the 2010 Tax Relief Unemployment Insurance Reauthorization and Job Creation At, gives surviving spouses the right to claim any estate tax exemption amount their spouse didn’t use. Unmarried persons cannot take advantage of portability.

The key with portability is to file an estate tax return within nine months of the spouse’s death. This must be done whether or not the spouse owes no estate tax. The portability benefit is lost if the return isn’t filed in time.

Couples who will certainly want to take advantage of portability are those whose estates are close in value to the current $10 million exemption amount. But even smaller estate may benefit, since the exemption amount is set to get back to $1 million by 2013, unless congress makes changes.

It is possible that Congress will extend the current $5 million exemption amount or raise it above $1 million in 2013. It just isn’t clear what will take place. Portability may not even be an option in the future.

What is certain is that it is best to be prepared. This means filing an estate tax return within nine months of a spouse’s death whether or not estate taxes are owed. Doing so will open the door to taking advantage of portability if the conditions are right.

Source: Forbes, “The coming flood of estate tax returns,” Roberton Williams, November 30, 2011.