Extension of Time to Elect Portability of the DSUE
and Preserve Family Wealth
In 2011, the IRS introduced the concept of portability of the estate tax exemption from a deceased spouse to a surviving spouse. Currently, with the federal estate tax exemption at $12 million, a married couple can transfer up to $24 million to heirs without a federal estate tax. One of the tools enabling this large tax-free transfer is electing the DSUE, the “Deceased Spouse Unused Exclusion.”
What is Portability and How to Obtain it?
Portability occurs when a surviving spouse files a US Form 706, Gross Estate Tax Return, for the sole purpose of calculating and capturing any unused estate tax exemption from the estate of the first spouse. Completing a Form 706 to make the DSUE election is no easy task.
Why should one elect Portability/DSUE?
If the surviving spouse has an estate worth much lower than the current $12 million estate exemption, why file for the DSUE?
- Congress may reduce the estate tax exemption to 5 or 3.5 million
- The estate of the surviving spouse may appreciate substantially if there are businesses and/or real estate
- A young healthy spouse has many years to accumulate more wealth and have a potential taxable estate
- The surviving spouse may inherit from other relatives
When must one file to elect Portability/DSUE?
Good news! This year the IRS extended the time to file for the DSUE election to on or before the fifth anniversary of the decedent’s death.
With the current federal tax exemption so high, spouses should take advantage and claim any unused estate tax exemption after the death of the first spouse. Given the factors mentioned above, even smaller estates should consider filing for portability.