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Filing a federal estate tax return to elect portability in Texas

One of the benefits provided under the federal estate tax exemption is the ability to elect portability. Portability is the ability of a surviving Texas spouse to reserve the remaining portion of the deceased spouse's estate tax exemption for use upon his or her death. For instance, if the deceased spouse's estate is worth $4 million, the surviving spouse may elect, through portability, to reserve the remaining $1.25 million to add to his or her $5.25 million (for 2013) exemption making the surviving spouse's exemption $6.5 million.

In order to make an election for portability, an estate tax return must be filed with the IRS. To aide taxpayers wanting to make this election, the IRS has created a form for those who are not required because of the total value of the estate to file a full estate tax return. However, using this form can be tricky.

Filers are required to pick a range within which the value of the decedent's estate falls. Not all property has to be disclosed on this form, but it must be included in the value estimation. Regardless of which form is used, the portability election must be checked.

When a spouse passes away, several issues require attention regarding his or her estate. One of those issues is making the determination whether an estate tax return is required. Since the current exemption is so high, most Texas residents will not be required to file a return. The second issue then is the portability election. If any possibility exists that the exemption could be needed, it may be better to err on the side of caution and file the short form in order to make the portability election.

Source: Forbes, Estate Tax Portability -- What Is A Complete And Properly-Prepared Estate Tax Return?, Lewis Saret, Dec. 18, 2013

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