The portability of the estate tax is still in place after the agreement that was reached to avoid many of the automatic tax increases and spending cuts that were in the offing for 2013.
To explain what portability means in this context we will provide a simple example. Let’s say that Alex and April have been married for many years. They both worked throughout their lives, and each of them contributed to the family wealth.
Under the tax code every taxpayer is entitled to an estate tax exclusion. In 2013 this exclusion is $5.25 million. This means that Alex and April have a combined exclusion of $10.5 million this year.
The matter of portability involves the ability of a surviving spouse to use the exclusion that his or her deceased spouse was entitled to. Since both Alex and April contributed into the store of assets that comprises the family’s estate, it would seem that the surviving spouse should have both exclusions to utilize after his or her partner passes away.
Fortunately the estate tax exclusion is portable, so if Alex was to die in 2013 April would have a total execution of $10.5 million assuming none of the exclusion afforded to Alex had been utilized.
To take advantage of the portability option action is required. The executor of the estate must file Internal Revenue Service Form 706 to elect portability. This must be done no later than nine months after the passing of the decedent in question, but it is possible to petition the Internal Revenue Service to grant a six-month extension if it is necessary.
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