Did you or someone you know lose a spouse in the last few years? If your spouse died between December 31, 2010 and January 1, 2014 and you did not file an Estate Tax Return 706 because there was no tax due, you may be able to reclaim any unused portion of his or her estate tax exemption allowance against your own estate tax upon your death IF you act quickly.

The current estate tax exemption allowance for each individual is $5.25 million.  So, as long as your estate is below the exemption amount, it will not incur federal estate tax (some states may still impose a state estate tax, however).  You may be thinking that your estate will never be that large, but how do we know what our estates will be worth by the time we die?  What if we are injured and receive a large damage award, or win the lottery, or receive an unexpected inheritance?  If our estate rises above our own exemption allowance our heirs can forfeit 40% of any amount above it.

But, if we have filed an estate tax return form 706 for our deceased spouse within 9 months of death, we have preserved any portion of their exemption that exceeded the value of their estate upon their death, and transported it to our own.  If they left no taxable estate (because everything went to you) your exemption allowance will become your own plus theirs.  Then, you can shelter $10 million + from federal estate tax.

This new law is being applied retroactively all the way back to anyone who died after December 31, 2010 and before January 1, 2014.  And, because they may not have filed an estate tax return 706, they are being given until the end of this year to do so.  Across the top of the return must be written the following:“FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).”

If you or anyone you know lost a spouse in 2011, 2012, 2013, or 2014 be sure you or they check with their attorney immediately to see if they need to act.  Once the ball drops on Times Square at the stroke of midnight January 1, 2015 their deceased spouse’s unused estate tax exemption allowance will be lost forever.

Please contact us for any questions regarding Estate Tax Return 706.