Lesson 21: How to Elect Portability

Portability of the estate tax exemption is a crucial concept in Understanding Portability. This lesson will guide you on how to elect portability, ensuring that you maximize the estate tax exemption for your surviving spouse.

What is Portability?

Portability allows a surviving spouse to utilize any unused portion of the estate tax exclusion of their deceased spouse. This can significantly reduce the estate tax liability for the surviving spouse's estate. For an in-depth understanding, refer to Estate Tax in the United States on Wikipedia.

Steps to Elect Portability

To elect portability, follow these key steps:

  1. Determine if the estate qualifies to file Form 706.
  2. Complete and file Form 706 within the required timeframe.
  3. Properly calculate the unused exclusion amount.

Step 1: Determine if the Estate Qualifies

Not all estates are required to file Form 706. Generally, if the estate's value exceeds the basic exclusion amount, filing is mandatory.

Step 2: Complete and File Form 706

Form 706 must be meticulously completed. Ensure that all required sections are filled out, particularly Section C, where the portability election is made.



Section C - Portability of Deceased Spousal Unused Exclusion (DSUE)



  
In this section, you will detail the DSUE amount. Ensure accuracy as this impacts the future estate of the surviving spouse.

Step 3: Calculate the Unused Exclusion Amount

The unused exclusion amount is the difference between the basic exclusion amount and the amount of the exclusion used by the decedent.




  
Example Calculation:

  
    
    
  • Basic Exclusion: $11.7 million
    • 
    
  • Exclusion Used by Decedent: $9 million
    • 
    
  • Unused Exclusion: $2.7 million
    •

Timeline for Filing

The timeline for filing Form 706 to elect portability is critical. The form must be filed within nine months of the decedent's death. Extensions can be requested if necessary.

Visualizing the Process

The following diagram illustrates the process of electing portability:


graph TD
    A["Decedent's Death"]
    B["Determine Need to File Form 706"]
    C["Complete and File Form 706"]
    D["Calculate DSUE"]
    E["Elect Portability"]

    A --> B
    B --> C
    C --> D
    D --> E

Conclusion

Electing portability can significantly benefit the surviving spouse's estate. By carefully following the steps outlined above, you can ensure the DSUE is preserved and utilized effectively. For further reading, explore the Benefits and Limitations of portability in the next lesson.

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