The concept of “portability” is still relatively uncommon in the law of estate planning, having become available only after 2011. Since then, it’s been both a blessing (for its tax saving benefit) and a curse (because of rules that seemed to be constantly shifting). Fortunately, the IRS has recently clarified some important deadlines about portability.

How can a portability election benefit you and your family? It could help save hundreds of thousands of dollars of estate and gift taxes for your family if you lost your husband or wife in the last few years. Although the exact mechanics of the tax are involved, portability makes it much easier for estate planners and tax professionals to save taxes for you and your family. However, portability is not automatic (even under the new regulations), so you must take some action.

Why should I care?

Portability allows a surviving spouse to inherit and use the estate tax exemption from a deceased spouse. If you’re planning isn’t as good as it could otherwise be, portability can save hundreds of thousands of dollars of estate and gift taxes. For those who are proactively planning, it also makes crafting your trust or will much more flexible so we can tailor the plan to you and your family’s needs, rather than to the needs of the IRS.

What’s new with portability?

Under a new IRS revenue procedure, you now have additional time to take advantage of portability. In the past, you had only 15 months after the death of a loved one to file for portability. Now, you now have two years after the passing of a spouse to file for portability, making this option much easier to use than before.

The IRS also knows that the rules have shifted and been confusing for everyone over the last few years. So, there is a unique opportunity to file a late portability estate tax return, as long as you meet certain requirements and have it submitted by January 2, 2018. 

Naturally, if you have a substantial estate (over $5.49 million) or are not a US citizen or resident alien then the traditional 15-month rule will continue to apply to you. Also, like any legal or tax issue, it’s always a good idea to obtain qualified assistance as early as possible so you can have the widest possible set of options and best possible outcome.

What do I need to do now?

If you’ve lost your spouse after 2011, and had not yet spoken with an estate planning attorney about your options, now is the time. As the stock market and housing markets have recovered in the last few years, it might be worth a second look to see if a portability election is right for you and your family, even if you decided against one before.

Although available now, you can’t rely on this relief being available forever - January 2, 2018, will be here before you know it. Now is the time to give us a call to discuss whether a portability election can help you and your family save taxes. If you want to ensure that your family is cared for, contact us to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.