In-Depth Articles   Portability of the Estate Tax Exemption and Individuals Dying in 2011 – Important Information   A reminder that for individuals who died in 2011 with a surviving spouse and a gross estate less than $5million, you should still consider filing a  Federal Estate Tax Return (Form 706) if you wish to preserve the “portability” of the decedent’s unused estate tax exemption. The first returns are due by October 1, 2011 for a death on January 1, 2011. “Portability” is the carryover of any of the decedents unused estate tax exemption (currently $5mill) to the surviving spouse.   The reason to consider this is that although the estate tax exemption is $5mill per person for 2011 and 2012, it will revert back to $1mill in 2013 without additional legislative action. It is unknown if the exemption will be increased, decreased, the estate tax repealed altogether, or if the portability will survive.   Example: Gross estate of decedent -                               $2.0mill (sheltered) Remaining estate of surviving spouse -              $2.5mill So the total combined estate is                        $4.5mill No tax at first death  - if the estate tax return is filed or not If no estate tax return is filed at the first death, the portability of the decedent’s unused exemption of $3mill ($5mill less $2mill used) is not available upon the surviving spouse’s death, so if the estate tax exemption is back to $1mill, the survivor’s estate will pay tax on $1.5 mill ($2.5 mill less $1mill exemption). If an estate tax return is filed at the first death to preserve the portability, the survivor’s estate will pay no estate tax ($2.5mill less $1mill exemption less $3mill portability).   If you have questions about this issue or want more information, please contact Linda M Treise, CPA at ltreise@hughessnell.com or Patti Hardin, CPA at phardin@hughessnell.com or call our office at 239-939-2233.     Back to In-Depth Articles Back to Resources   To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used for the purpose of avoiding penalties assessed under the Internal Revenue Code.