Since 2010, the Federal estate tax exemption has been $5 million or higher. When a person dies and does not use all of his or her estate tax exemption, his spouse is able to add the unused exemption to his or her exemption if an estate tax return is filed, which elects to carry over the decedent’s unused exemption to the surviving spouse. This election is referred to as a portability election.
The IRS previously ruled that the portability election could only be made on a timely filed estate tax return, either nine months after the decedent’s death or 15 months if an extension is requested. A lot of surviving spouses who might benefit from electing portability neglected to file a timely estate tax return. Fortunately, the IRS has published Revenue Procedure 2014-18, which gives an extension until the end of 2014 to file the estate tax return to make the portability election. The Revenue Procedure will only help for a decedent who died between January 1, 2011 and December 31, 2013 and whose estate was below the estate tax filing threshold.
The Revenue Procedure will also help the surviving spouse of a same-sex marriage. Prior to the Windsor decision by the Supreme Court, a federal law known as the Defense of Marriage Act (“DOMA”) did not allow the surviving spouse of a same-sex marriage to make the portability election. Now that the Supreme Court has ruled DOMA to be unconstitutional, the surviving spouse is allowed to make a portability election. The new Revenue Procedure will allow an estate tax return to be filed in 2014 so that the surviving spouse can benefit from portability, even if the deadline for filing the return has already passed.