Currently the estate tax exemption is $11.7 million per person or $23.4 million per couple and it is scheduled to remain at that level until 2025 unless, of course, Congress enacts legislation modifying it before 2025.
Recently Bernie Sanders proposed legislation lowering the estate tax exemption to $3.5 million per person or $7 million per married couple. Many surviving spouses mistakenly believe that he or she need not file a tax return upon his or her spouse’s death because he or she inherited his or her spouse’s assets tax free. It is true that a tax return may not be required by the IRS for the deceased spouse’s estate; however, failure to file the tax return for the deceased spouse may be a big mistake on behalf of the surviving spouse. Filing the return allows the surviving spouse to preserve the deceased spouse’s $11.7 million exemption to be utilized upon the surviving spouse’s death to protect $11.7 million of the surviving spouse’s estate from estate taxes. This may be crucial since it appears the exemption will be reduced by Congress for the year 2022.
Surviving spouses need to seriously consider the potential advantages of filing a tax return for his or her deceased spouse to make the portability election. The surviving spouse has two years to file tax returns from the date of death. Whether this decision is proper for you, you must consult with your CPA/tax preparer to properly make this decision.