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Estate Planning: Portability Elections Modified

Every person has a credit against payment of estate and gift taxes of $12,060,000 in 2022. Spouses each have the credit and thus can together pass up to $24,120,000.  If the predeceasing spouse does not use his or her entire credit, the law allows for the passage of the unused credit to the surviving spouse (this is called a portability election). In the past, it was necessary to file an Estate Tax Return within two years of the death of the predeceasing spouse and check a box to elect to pass the deceased spouse’s unused credit to the surviving spouse.  In larger estates, the failure to port over the unused credit of the deceased spouse to a surviving spouse with a large estate could result in significant estate or gift taxes.

In July, the IRS extended the time within which a portability election may be to five (5) years. As it turned out, the two-year filing deadline resulted in numerous Private Letter Ruling requests to the IRS due to persons unknowingly missing the deadline. In larger estates, failure to pass a deceased spouse’s unused credit to a surviving spouse could result in significant gift or estate taxes that could have otherwise been avoided. As might be expected, there are some quirks to IRS’ new extended five-year filing rule.  For instance, what happens if gift or estate taxes are paid by the surviving spouse during the five- year period and then a portability election is made that would have nullified those taxes? Chauvel & Glatt’s Estate Planners provide estate and gift planning, trust administration and other related services that allow clients to pass their estates on to their chosen beneficiaries with the least amount of taxes, probate fees and associated costs. Reach out to Chauvel & Glatt to learn more.

The material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute, legal advice or promise similar outcomes. For information on your particular circumstances, please contact Chauvel & Glatt at 650-573-9500. (Photo Credit depositphotos.com).

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