IRS Grants Extension for Portability Purposes

Newsletter | Jul 17, 2017 | Shannon Laymon-Pecoraro

Many people are aware that in 2013, Congress established a permanent basic Federal estate tax exclusion amount of $5,000,000, as adjusted for inflation. For purposes of the Federal estate tax, a portability election allows a surviving spouse to carryover the unused estate tax exclusion amount of the deceased spouse. This carryover essentially increases the exemption for the surviving spouse by the amount of the unused exclusion of the decedent. However, to make a valid election, the personal representative of the estate (often known as the Executor or Administrator) is required to file a timely IRS Form 706 within nine months after the decadent’s date of death, or in the alternative, filed a six-month extension via IRS Form 4768.

To demonstrate the importance of this election, let’s imagine that Al died with a $7 million estate, of which $4 million went to his wife, Barbara, and $3 million went to his daughter. Al’s estate is entitled to a $4 million marital deduction for the amount left to the surviving spouse, so Al only used $3 million of his $5 million exemption as a result of the gift to his daughter. The Executor of Al’s estate timely filed an Estate Tax Return and made a portability election, which resulted in an additional $2 million exemption carrying over to Barbara to use at her death. This election was important, because Barbara had approximately $3 million in her own name at the time of Al’s death. As a result, if Barbara died shortly after receiving the $4 million from Al’s estate, at the time of her death, the full $7 million owned by Barbara would pass to the beneficiaries free from Federal estate tax. Had the Executor not timely filed the portability election, $2 million of Barbara’s assets would be subject to Federal estate tax.

The failure to elect portability to preserve the unused portion of a decedent’s exemption was a problem a number of attorneys throughout the country faced, and the only way to tackle it over the past few years was to obtain a costly Private Letter Ruling from the IRS. To address this issue, in June 2017 the Internal Revenue Service (IRS) issued Revenue Procedure 2017-34 to grant an extension for those who failed to elect portability in a timely manner. Accordingly, this revenue procedure provided a simplified method to obtain an extension of time to elect portability by permitting the personal representative of an estate for which there was no filing requirement to file a return before the later of January 2, 2018, or the second anniversary of the decedent’s date of death.

Ask Kit Kat – Woodpeckers in Dismal Swamp

Hook Law Center:  Kit Kat, what can you tell us about the re-emergence of woodpeckers in the Great Dismal Swamp?

Kit Kat:  Well, this seems to be a victory for conservation efforts. There haven’t been woodpeckers in the Great Dismal Swamp National Wildlife Refuge, which straddles the NC and Virginia state lines, since 1974! I am referring to the red-cockaded woodpecker, that is, which is known for having a very attractive male with a dash of red feathers on its head. They are known to live in live trees, and they select mates for life. Previously, the birds had a range of habitat running as far north as New Jersey; however, that was eventually reduced due to logging and development. By 1970, the species was in decline, and in that year it was added to the endangered species list. Now, it appears that the northernmost limit is in the Sussex and Suffolk counties of Virginia. Colonies in both counties are headed up by the Nature Conservancy’s Piney Grove Preserve (Sussex) and the Center for Conservation Biology (Suffolk).

The woodpeckers which have now bred in the Great Dismal Swamp came from woodpeckers in North and South Carolina. From a group of 18 released into the area over the last two years, 5 remained (2 males and 3 females). They managed to produce several eggs; two survived. Those two have been banded, with two bands being placed on each’s right leg and three on their left leg. Just last month (June), the babies had feathers. Using a telescopic camera, it was determined that both are female. This fall, Bryan Watts, director of the Center for Conservation Biology in Suffolk, says four more pairs will be introduced there. Watts says they are aiming to have five breeding groups by 2020. Keep your fingers crossed that things will develop as planned. As director Watts says, ‘Nature and animals will do their thing. There’s only so much we can manage.’ (Victoria Bourne, “Endangered red-cockaded woodpeckers make a rare re-entrance at Dismal Swamp,” The Virginian-Pilot, July 5, 2017, pg.4)

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Shannon Laymon-Pecoraro

Attorney, Shareholder, CELA
757-399-7506 | 252-722-2890
[email protected]

Shannon Laymon-Pecoraro is a Shareholder of Hook Law practicing in the areas of elder law, special needs planning, estate and trust administration, estate planning, asset protection planning, financial planning, guardianships, and conservatorships. Ms. Laymon-Pecoraro also works with plaintiffs who have been injured, and their trusted advisors, to advise on public benefits issues and developing trusts to protect settlements and verdicts. To date, she has completed over 250 personal-injury related trusts, specifically Settlement Protection Trusts and Special Needs Trusts, including those with Medicare Set-Asides.

Ms. Laymon-Pecoraro is certified as an Elder Law Attorney (CELA) by The National Elder Law Foundation (NELF). Approved by the American Bar Association and authorized by the Pennsylvania Supreme Court, the CELA certification is the legal industry’s “gold standard” for elder law and special needs practitioners. There are only about 500 CELA-certified attorneys nationwide.

Prior to joining the firm in 2012, Ms. Laymon-Pecoraro handled estate planning documents for members of the United States Department of the Army and has been involved in the legal representation of several large corporations.

Practice Areas

  • Elder Law
  • Estate & Trust Administration
  • Estate Planning
  • Asset Protection Planning
  • Guardianship & Conservatorship
  • Long-Term Care Planning
  • Special Needs Planning
  • Financial Planning
  • Personal Injury Settlement Consulting

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