On June 9, 2017, the IRS issued a revenue ruling that provides a more liberal time frame for certain estates to make the federal estate tax portability election. The portability election allows a surviving spouse to claim their deceased spouse’s unused portion of the federal estate tax exemption and add it to the balance of their own federal estate tax exemption. The amount of the exemption ported to the surviving spouse is called the “Deceased Spouse Unused Exclusion” or “DSUE” amount.
Prior to the recent ruling, in order to utilize the portability election, the estate tax return had to be filed within nine months (or fifteen months if a prior extension was filed) after the death of the first spouse. Now, for estates below the federal estate tax threshold (currently $5.49 million), the estate tax return must be filed within two years of the death of the first spouse in order to use the portability election. The personal representative must state, “This return is being filed pursuant to Rev. Proc. 2017-34 to elect portability under § 2010(c)(5)(A)” at the top of the return.