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Effective July 8, 2022, the IRS will allow certain estates to elect late portability relief from a deceased spousal unused exclusion (DSUE) up to five years after the decedent’s death. Rev. Proc. 2022-32 generally provides this extended relief for the estates if the executor was not otherwise required to file an estate tax return.

What is portability?

Portability is the allowance of a surviving spouse to use the remaining DSUE from their deceased spouse.

If elected, portability provides the surviving spouse with an additional amount of exclusion, protecting the surviving spouse’s estate from estate tax should the estate grow to a point it exceeds the lifetime exemption of an individual. The 2022 lifetime amounts are $12.06 million per individual and $24.12 million per married couple.

A simple illustration to understand why taking advantage of the five-year late portability election relief under Rev. Proc. 2022-32 is as follows: On the day of death of the deceased spouse, the deceased spouse and surviving spouse have an unused lifetime exemption of $10 million each. Within five years of the deceased spouse’s death, the surviving spouse’s estate grows to $15 million. Without a portability election, $5 million of surviving spouse’s estate should be subject to estate tax upon death, assuming the estate’s value stays the same. With a late portability election, allowed by Rev. Proc 2022-32, none of surviving spouse’s estate should be subject to estate tax, and the estate has $5 million of unused exclusion to protect the estate should it continue to grow.

How to make the late election

Late portability relief is not an automatic process, and one must file Form 706. Under the simplified method, Rev. Proc 2022-32 allows the executor to make the portability election by filing on behalf of the estate a complete Form 706 United States Estate and Generation-Skipping Transfer Tax Return with a statement at the top of the return that it is “Filed Pursuant to Rev. Proc 2022-32 to elect portability under Sec. 2010(c)(5)(A)” on or before the fifth anniversary of the decedent’s death.

Further, relief is only available if a spouse survived the decedent, died after December 31, 2010, was a citizen or resident of the United States on the date of death, and if the estate was not otherwise required to file an estate tax return. After the five-year period expires, a taxpayer can seek relief by requesting a private letter ruling under Reg. Section 301.9100-3.

Previously, the IRS provided two-year late portability relief under Rev. Proc 2017-34 until it was superseded by Rev. Proc. 2022-32.

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Calvetti Ferguson works with mid-market companies, private equity firms, and high-net-worth individuals across the country. Our goal is to help you understand which type of trust or specific plan best suits your needs, and we can also review your current estate plan to accommodate any changes. Regardless of the complexity of the compliance, assurance, advisory, or accounting need, our team stands ready to assist you.

Kelly Waibel-Rangel, CPA

Tax Partner

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