The Internal Revenue Code imposes a significant tax on the transfer of a person’s estate by gift during life or at death. However, every person has a credit against the estate tax which exempts roughly $11,200,000 of gift/inheritance transfers.
In the case of spouses, the unused credit of the first spouse to die may be transferred to the surviving spouse. Thus, if the predeceasing spouse did not make any taxable transfers during life or at death, then that spouse’s credit may be transferred to the surviving spouse resulting in the surviving spouse having a credit against the estate tax of over $24,000,000. But, in order for the predeceased spouse’s credit to be transferred to the surviving spouse there must be an Estate Tax Return (IRS form 706) timely filed for the predeceasing spouse.
What if there is a failure to timely file a form 706 for the predeceasing spouse? Does this result in the surviving spouse’s inability to take advantage of the unused credit of the deceased spouse (in effect, the loss of the ability to transfer $11,200,000 free of the estate and gift tax)? Depending on the facts, the surviving spouse may request a Letter Ruling from the IRS allowing for the late filing of an Estate Tax Return for the predeceased spouse. If such a ruling is granted, then a form 706 may be filed for the predeceased spouse allowing for the transfer of that spouse’s credit to the surviving spouse.
This firm has experience requesting Letter Rulings of the nature discussed above. Please do not hesitate to contact our estate planning attorneys if you have any questions or need any help.
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.