A review of the Portability Rules at the Heckerling Institute gives rise to the following trivia, which estate tax planning lawyers should perhaps be memorizing:
True or False [the answers are at the end of this article, but see how much you know]:
1. Under Section 20.2010-2(a), the portability election can only be made on a timely filed and complete estate tax return Form 706.
2. Estates that are required to file the Form 706 ( i.e. estates that exceed the basic exclusion amount), will lose the portability allowance if the return is filed after the filing deadline (which is 9 months from date of death, or within 6 months after the filing deadline if a valid extension is filed). There is no way whatsoever around this if a return is not filed. A return is not considered to be filed unless it is a valid Form 706 that is actually signed by the fiduciary.
3. The return may not be perfect, but if it is signed and filed, then it can be updated to save the election under some circumstances. There is no Form 706-EZ.
WHAT ASSETS NEED TO BE VALUED?
4. If the estate tax return is required to be filed because of the value of the estate, then only assets increasing estate tax have to be valued with appropriate appraisals. Assets passing to a surviving spouse or charity do not have to be valued because those assets do not increase estate tax.
5. Small estates will need appraisals where the value of the marital or charitable devise or devises will determine the value of the non-marital charitable assets, such as where the trust says “give my spouse $2,000,000 worth of assets and the rest will go to my children.”
WHEN CAN YOU GET 9100 RELIEF FOR A LATE FILED ESTATE TAX RETURN-OOPS
6. 9100 relief will apply under Revenue Procedure 2014-18, if the estate is below the filing threshold (gross assets are less than the exemption amount) or a return was timely filed and the Portability Allowance was inadvertently elected out of.
7. Typically, 9100 relief in most areas of the tax code will only be available if the taxpayer consulted with an advisor who gave wrong or insufficient advice. This is not being mentioned in the Private Letter Rulings being issued, and is an example of IRS leniency.
8. For estates of descendants dying after January 1, 2014, the IRS may grant discretionary 9100 relief for estates with gross assets less than the exemption amount, which are not otherwise required to file a return, however no private letter ruling is required.
|Decedent who died prior to January 1, 2014||Decedent who died on or after January 1, 2014|
Estates with Gross Assets under the Estate Tax Exclusion Amount ($5,490,000)
|Relief may be granted under Revenue Procedure 2014-18||Must file for 9100 relief|
Estates with Gross Assets over the Estate Tax Exclusion Amount, but no tax owed due to Marital Deduction or Charitable Deduction
|No relief available||No relief available|
Estates Owing Estate Tax
|No relief available||No relief available|
OTHER IMPORTANT PORTABILITY POINTS
- A) Where previous gifts by the decedent exceeded his or her exemption, the DSUE is reduced only by the previous exemption usage, and not by the excess gift that tax was paid upon. So if the decedent made a $5,600,000 gift in 2016 and paid gift tax on $150,000, the DSUE for a death in 2017 will be $40,000 ($5,490,000 minus $5,450,000)B) You can only use your first spouse’s DSUE, not the DSUE from subsequent spouses.
Planners should consider funding a hybrid asset protection trust to make use of the DSUE while having the assets available for the surviving spouse if needed – Under a hybrid asset protection trust the spouse is not named as a beneficiary but may be added by Trust Protectors if certain events occur.
- False – ALL ASSETS must be valued, even if there is no estate tax due.
- False – This Revenue Procedure only applies for estates of decedents who died PRIOR to January 1, 2014.
- False – PLR is required and as of now there are no provisions for permanent relief in the final regulations. The cost is $9,800 if received prior to February 2, 2017 and $10,000 thereafter. Speakers at the Heckerling Institute thought it was $27,500.
- A) True
B) False – You can only use your last deceased’s spouse’s DSUE, not the spouse before that. The surviving spouse should therefore consider gifting without delay or at least before remarrying and having a new spouse die. The black widow serial killer could keep marrying and making gifts by killing multiple husbands.
ABOUT THE AUTHORS
Alan S. Gassman J.D., LL.M. (Taxation), Florida State Bar Certified Specialist in Wills, Trusts & Estates, AEP (Distinguished) is a partner of Gassman Law Associates in Clearwater, Florida. Mr. Gassman is a Florida State Bar Certified Legal Specialist in Wills, Trusts and Estates Law and a member of the National Association of Estate Planners and Councils.
Mr. Gassman graduated from Rollins College with a B.A., with distinction, in Business Administration and Accounting. He went on to earn both his J.D., with honors, and LL.M. in Taxation from the University of Florida. He is currently licensed to practice law in the state of Florida. Mr. Gassman is currently a Fellow of the American Bar Association, a member of the National Association of Estate Planners and Councils, and a member of the Florida State Bar Association. He is a former member of the Board of Advisors of the Journal of Asset Protection, a former Law and Leading Attorney, and the past President of Pinellas County Estate Planning Council.
Mr. Gassman has received numerous awards and honors, including an AV® Preeminent Peer Review RatingSM by Martindale-Hubbell® a Who’s Who in Science and Industry and Law and Leading Lawyers, and a Who’s Who in American Law. He is also rated as a Florida Super Lawyer, a Tampa Bay Top Lawyer, and a Florida’s Trend Top 1.8% of the Best Lawyers in Florida.
Mr. Gassman has authored more than 200 articles in national publications, symposia and law school text books on physician planning, estate tax planning and income tax issues, problems and solutions. He is a contributing author for Leimberg Information Services and the National Association of Estate Planners and Councils. He was also a contributing author for the American Law Institute-American Bar Association Practice Checklist Manual on Advising Business Clients.
Mr. Gassman is also a frequent lecturer and was the co-chairman and presenter for the Florida Bar’s annual Physician Representation seminar and the vice-chairman and presenter for the Florida Bar’s annual Wealth Conversation seminar.
OTHER ARTICLES IN THIS ISSUE
- IRA & RETIREMENT BENEFIT PLANNING: FAKE NEWS! by Philip J. Kavesh, J.D., LL.M. (Taxation), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Trust & Probate Law
- ASSET PROTECTION: The Nevada Asset Protection Trust: Why Nevada is the Leading Jurisdiction…Period! by Steven J. Oshins, Esq., AEP (Distinguished)
- SUPPORT & ADMINISTRATIVE STAFF: How the Right Phone Experience Can Help Grow Your Business by Phoebe Osborn, Content Marketing Specialist
This article is the copyrighted material of Alan Gassman of Gassman & Associates, P.C. and is being reposted with the express written consent of Alan Gassman.