In December, 2010 the concept of “portability” was adopted in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.  Portability essentially allows a surviving spouse to use their own exclusion amounts and any remaining unused exclusion amounts of the deceased spouse.  The IRS recently published guidance in Notice 2011-82 on the Marital Portability Election, that includes the following:

  1. In order for the surviving spouse to qualify to use the deceased spouse’s unused exclusion amount, the following must occur:
    1. The deceased spouse died on or after January 1, 2011; and
    2. The executor for the deceased spouse timely files an IRS Form 706.  This filing is required regardless of whether or not there is a taxable estate to ensure the surviving spouse use of the Marital Portability Election.
    3. If the IRS Form 706 is filed, it is presumed that the personal representative is electing to have portability apply for the surviving spouse.  If the personal representative does not want to elect portability, then either:
      1. If an IRS Form 706 is not required, the personal representative will not file an IRS Form 706 which elects portability; or
      2. If an IRS Form 706 is require, there will be instructions on the IRS Form for how to give the IRS notice of the non-election.

For those updating their estate planning documents, it is important to understand that currently the “portability “ provisions are scheduled to sunset on December 31, 2011 if no additional change to the law is adopted.  Therefore, your estate planning documents should take this into account via a disclaimer trust or other provisions allowing flexibility.