IRS Extension of Estate Tax Break Takes Effect
Virginia Beach, VA (Law Firm Newswire) March 12, 2014 – The Internal Revenue Service (IRS) recently extended a tax break for married couples.
The ruling, announced in Revenue Procedure 2014-18, extends the deadline to take advantage of an estate tax break known as “portability.” The break went into effect on an interim basis in 2011, and it was made permanent under the American Taxpayer Relief Tax Act of 2012.
“The IRS grants every U.S. citizen a “basic exclusion,” which is a lifetime exclusion amount from estate and gift taxes,” Andrew Hook, a Virginia Beach estate planning attorney, explained. “For 2014, that amount is $5.34 million. Portability allows widows and widowers to add the unused portion of their deceased spouse's basic exclusion to their own, increasing the amount of assets they can hand over to their own heirs tax-free.”
In order to elect portability, an estate tax return (IRS Form 706) must be filed on behalf of the estate of the deceased spouse. The normal deadline for doing so is nine months after the death, plus six months if an extension is requested.
Previously, many people who should have elected portability failed to do so, either because they or their advisors were unaware of the rule or because they did not expect the surviving spouse's financial worth to exceed the basic exclusion amount.
The recent IRS ruling allows portability to be elected for persons who died during calendar years 2011 through 2013, were U.S. citizens or residents upon death and had a surviving spouse. The deadline to take advantage of this extension by filing Form 706 is December 31, 2014. The IRS instructs those taking advantage of the ruling to write at the top of the form, “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).”
The Revenue Procedure announcement also allows for the credit or refund of any taxes overpaid as the result of failure to elect portability. The deadline for doing so is three years from filing Form 706 or two years from the payment of the tax — whichever comes later.
“This Revenue Procedure is of particular interest to same-sex married couples, who were only recently allowed to elect portability,” Hook added. “Like opposite-sex couples, they can now not only elect portability going back to 2011, but likely get a refund on taxes they paid as the result of their previous exclusion from this tax break.”
Hook Law Center
295 Bendix Road, Suite 170
Virginia Beach, Virginia 23452-1294
5806 Harbour View Blvd.
Suffolk VA 23435
- Intra-Family Conflict After Death – It’s Expensive
Within the confines of this office’s newsletters over the years are strategies designed to assist you in planning your estate to implement your decisions, your goals, avoid taxes and avoid probate. But were you aware that even the best laid estate plans can be torn apart by feuding family members after you are gone? Intra-family […]
- Do You Need to Revisit Your Estate Plan in 2017? The Answer is Probably “Yes.”
Estate Planning attorneys generally advise that plans be revisited with regularity to adjust for changes in law and changes in personal circumstance. At a minimum, your estate planning documents should be reviewed every 2-5 years, but 2017 is unique in that recent legal and political changes make it more likely that your estate plan needs […]
- The 65-Day Rule: What Every Trustee Should Know about Taxes
Happy New Year! We hope you and yours had an enjoyable holiday season and that 2017 brings you happiness and good health. With the close of the calendar year behind us, tax season is just beginning for individuals and many entities. If you are serving as the trustee of a complex trust, however, it’s not […]
- ABLE Accounts Open in Virginia
For those of you who have been waiting for Virginia529 to open the enrollment process for ABLE accounts, your wait is over. The Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act was signed into law in December, 2014 and Virginia passed legislation in March, 2015 to direct Virginia529 to develop, implement and administer […]
- Special Needs Trust Fairness Act Passes Congress
On December 7, 2016, the Special Needs Trust Fairness Act passed Congress as part of the 21st Century Cures Act and is expected to be signed by President Obama very soon. This is a momentous victory for persons with disabilities since it corrects the erroneous assumption under prior law that persons with disabilities lack the […]