The word “portable” is defined as “Able to be easily carried or moved.”
In estate planning the term has been borrowed to describe transferring the estate tax exclusion that was afforded to a deceased individual to his or her spouse.
Until 2011 the estate tax was not portable, and some critics felt as though this was not justifiable. They make a good point because in most cases both the husband and the wife contributed personally to the accumulation of their shared wealth.
Since two individuals contributed into the value of the estate, why should the surviving spouse only have one estate tax exclusion to work with?
In 2011 those who have always clamored for portability got their wish, and the estate tax exclusion has been portable ever since. This portability was continued upon the passage of the American Taxpayer Relief Act of 2012 .
There is however something very important to understand about the portability of the estate tax exclusion. It is not automatically bestowed upon you by the Internal Revenue Service.
When someone passes away the IRS must be made aware of the intention of the survivor to utilize the exclusion that was afforded to his or her deceased spouse. This is done through the filing of Internal Revenue Service Form 706.
There is a deadline for filing this form, and if you miss it you will not be able to utilize the exclusion that your deceased spouse was entitled to. You have nine months to file after the death of the individual in question, but a six-month extension is possible.
Mark S. Eghrari, Estate Planning Attorney
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