Revenue Ruling 2017-34 requires quick action when making a timely ‘portability election’ to take advantage of the relief from the deceased spousal unused exclusion amount (DSUE). Say that 3 times quickly!
DSUE comes from a simplification of the estate tax in 2010 and the two most important provisions of the estate tax for many “moderate” millionaires: (i) the unified credit, which protects $5.49 million from estate tax in 2017; and (ii) the unlimited marital deduction. The unlimited marital deduction allows any amount left to the surviving spouse to be free of estate tax if chosen.
A big concern of basic estate planning in the past was to make sure that a couple did not waste one of their unified credits. The DSUE saves people from creating trusts to work around losing the unified credits.
The relief offered by Revenue Procedure 2017-34 is available for the estates of decedents who died on and after December 31, 2010, in instances where no estate tax return was required and none was filed.
The executor can take advantage of the relief by filing an estate tax return with the election and making a reference to the revenue procedure at the top of the first page of the return. It’s available until January 2, 2018. After that, the procedure is available up to two years after the date of death.
This issue should be considered by moderate millionaires (those with a few million dollars) if they’re surviving spouses of people who died after 2010, where no estate tax return was filed. Look at the administrative headache of accomplishing the filing versus the chance that you might die with a net worth over the exclusion amount. It is important to remember: it’s not your current net worth, but rather what your date of death net worth might be.
Speak with an estate planning attorney, if you believe that this is something you should do. We are here to assist you with that by calling us at 757.259.0707 or 'requesting a consultation' online. Avoid the estate tax preparation rush in December.
Reference: Forbes (June 12, 2017) “IRS Offers Estate Tax Relief To Widows And Widowers”