As explained in earlier blogs, until December 31, 2012 (or sooner or later depending on Congressional action), decedent’s estates are able to elect portability of the estate tax exemption between spouses. In order to claim the benefit of portability, a timely filed estate tax return (Form 706) must be filed, even if the decedent’s estate is otherwise not required to be filed.
While this puts a significant burden on non-taxable estates, the time and cost involved may save significant estate taxes when the surviving spouse dies. Therefore, I am recommending to surviving spouses of all estates of individuals who died in 2011 or who die in 2012, to file the appropriate estate tax return in order to elect the portability of the deceased spouse’s unused estate tax exemption.
What happens if the estate tax return is not timely filed? In that case, it may be advisable to immediately request an extension to file an estate tax return by filing Form 4768. Therefore, it may be worth considering requesting a 6-month extension of time to file the estate tax return if you missed filing the return in time and would like to try to obtain the benefit of portability for the surviving spouse. This is one of those circumstances where you should run, not walk, to your estate planning professional or tax advisor to obtain the appropriate advice and guidance on how to proceed.