Is Portability the Best Option

Portability allows the surviving spouse to increase their lifetime estate and gift exemption. But is that the best option?

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A surviving spouse can elect to file an estate tax return on Form 706 to elect to “port” over any exemption on the deceased spouse that was not used. We refer to this as portability. The filing deadline for making this election is the normal 9-month deadline plus extensions, but the IRS had gotten so many requests for late relief that essentially the current deadline for this return is now five years after the date of death.

Most farm couples seem to use some type of “I Love You” wills or trusts and in that case, when the first spouse passes, there is essentially no taxable estate due to the unlimited marital deduction. Therefore, none of the lifetime exemption is used and let’s look at an example.