Yesterday morning, the Internal Revenue Service finally released the final Form 706 for 2011 decedents – just two weeks before the first returns are due of individuals dying in 2011 (i.e. those who died on/after January 1, 2011).
The bigger news is that we are just starting to get some guidance from the IRS on “portability”. Basically, beginning in 2011, a decedent can elect to pass his or her unused estate tax exclusion amount to his or her surviving spouse. (See IRC §2010(c)(4)-(5).) If the decedent was married or legally separated, the Instructions for Form 706 assume that the estate will be making this election. However, to pass the estate tax exclusion amount to the surviving spouse, the estate MUST file a “timely and complete” Form 706.
We have recommended to all surviving spouses of individuals dying in 2011 that they should consider filing a Form 706 (to pass the unused estate tax exclusion amount to the surviving spouse), even if the married decedent’s estate is below the filing threshold of $5,000,000 and even if the surviving spouse assumes that there would be no estate tax when he or she later dies. This may result in unnecessary expenses, but could possibly produce significant estate tax savings when the surviving spouse dies. Like many decisions, it will be important to discuss all options with the estate’s estate tax attorney before the filing deadline has passed.