The American Taxpayer Relief Act provides the surviving spouse the opportunity to “port” the unused amount of the deceased spouse’s estate tax exemption (“DSUE”). To utilize this DSUE, a timely estate tax return (Form 706) needs to be filed, even if one is not otherwise needed.

Many clients with total estates over $3 to $5 million dollars but much less than $11,700,000 (the 2021 exemption amount) choose not to file an estate tax return to claim the DSUE. The reasoning? There is no way they would ever have a taxable estate.

However, with the proposed significant reduction to the estate tax exemption amount, those same clients are beginning to regret that decision. Now what? For many clients, it is simply too late. However, the IRS has a procedure under Revenue Procedure 2017-34 that in many cases allows for the late filing for an estate tax return that was not otherwise required to be filed so that the DSUE may be claimed. This “DSUE” return needs to be filed within 2 years of the date of death.

If this situation applies to you, contact your attorney soonest.