What is estate tax & what happens if an executor of a California estate fails to make the portability election following the passing of the first spouse?

Estate Tax (noun):

The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death. It is a tax levied on the net value of the estate of a deceased person. This occurs before distribution to the heirs.

Estate (noun):

An estate includes the things that a person owns. The things left by someone who has died can be distributed based on a Will, Trust, or Intestate laws. Estates have to be administered in the Probate Court if the estate meets certain criteria. See our Infographic on The Probate Process.

What happens if an executor of a California estate administration fails to make the portability election following the passing of the first spouse?

Under the American Taxpayer Relief Tax Act of 2012, executors or administrators of an estate can make an election to preserve the estate tax exemption of the first spouse to pass away in a married couple. This allows the couple to take advantage of the exemption amounts of both individuals. This election, however, must be made within nine months following the death of the first spouse. A six-month extension for this requirement can be requested.

So what happens if the election is not filed? The following is an overview:

  • Since the law is so new, we do not know if the IRS will grant any form of relief for executors who fail to make the election.
  • If the estate of the second spouse contains more than the current exemption amount for an individual, an estate tax may become due that could otherwise have been avoided.
  • In other areas of the law, the IRS has allowed taxpayers to apply for “9100 relief” in order to gain forgiveness for late elections.
  • Unfortunately, a 9100 relief is difficult to achieve, costly, and usually requires a professional advisor to accept blame for the late election.
  • In many cases, the IRS will deny 9100 relief where the law contains a “hard and fast deadline.”
  • Some tax advisors speculate that the IRS may make an extension for late election during this first year of administration.

For more information about tax elections and estate administration in California, view our free guide, The Insider’s Guide to California Probate and Trust Administration. Contact an experienced San Diego probate attorney today. Call our toll-free number at (888) 443-6590. You may also fill out our quick and easy online form to obtain more information. It would be our pleasure to further assist you.

 
Scott Grossman

Scott Grossman

Attorney

The Grossman Law Firm, APC · 525 B Street, Suite 1500, San Diego, CA 92101 · (951) 523-8307