Late Portability Election: Form 706 and Revenue Procedure 2022-32

A surviving spouse can use a deceased spouse’s unused exclusion (DSUE) only if the decedent’s estate properly elects portability on Form 706. An estate that was not otherwise required to file may qualify for simplified late-election relief by filing a complete and properly prepared Form 706 within five years of death under Revenue Procedure 2022-32. Estates required to file under the statutory threshold generally cannot use that simplified procedure.

What portability transfers

Portability allows a surviving spouse to add a deceased spouse’s unused estate and gift tax exclusion to the survivor’s own exclusion. The unused amount is called the deceased spousal unused exclusion, or DSUE. The survivor may use it for later taxable gifts or at death, subject to statutory rules and later inflation adjustments. Portability can be valuable when the first spouse’s estate is below the filing threshold, but the transfer is not automatic merely because the spouses were married or filed joint income tax returns.

The deceased spouse’s executor generally makes the portability election by filing a timely, complete Form 706 and electing portability. Form 706 is ordinarily due nine months after death, with an automatic six-month extension available through Form 4768. The estate may have no estate tax due and may otherwise be below the filing threshold, yet still file solely to preserve DSUE for the survivor.

Simplified late relief for qualifying estates

Revenue Procedure 2022-32 provides a simplified method for certain estates that were not required to file Form 706 under the gross-estate and adjusted-taxable-gift threshold but failed to elect portability on time. The executor must file a complete and properly prepared Form 706 on or before the fifth anniversary of the decedent’s date of death. The return must prominently state that it is filed pursuant to Revenue Procedure 2022-32 to elect portability under section 2010(c)(5)(A).

This method is a timing remedy, not permission to file a short or incomplete statement. The Form 706 must contain the information required by the form and instructions, including a good-faith estimate of assets and deductions necessary for the DSUE computation. If the estate qualifies for the simplified procedure and satisfies its requirements, the late election is treated as timely for portability purposes. Keep proof of filing and a copy of the complete return.

Who cannot use the simplified procedure

An estate that was required to file Form 706 under section 6018(a) generally cannot use Revenue Procedure 2022-32’s five-year simplified relief. For those estates, the statutory filing deadline controls the portability election. A return may be required because the gross estate plus adjusted taxable gifts exceeds the filing threshold, even if deductions ultimately produce no estate tax. The executor should not determine filing duty only from the tax owed.

An executor who misses the filing window and does not satisfy the simplified method may need to request a private letter ruling for relief under the general regulations. That route is fact-specific, involves a user fee and procedural requirements, and is not guaranteed. The estate should act promptly once the missed election is discovered. The five-year date is a hard outer date for the simplified procedure; it is not a general extension for every estate.

Preparing Form 706 for a portability-only filing

The executor should identify all assets includible in the gross estate, debts and administration expenses, prior taxable gifts, marital and charitable deductions, and any other items needed to compute DSUE. The return should be complete under current Form 706 instructions, even when an estate is below the filing threshold. Valuation may use reasonable estimates where permitted by instructions, but the executor should preserve appraisals, account statements, deeds, business records, and documentation supporting deductions.

A portability return must be accurate enough to establish the DSUE amount the survivor may later claim. Incomplete schedules can leave the survivor with little proof if the IRS reviews a later gift or estate tax return. Keep the death certificate, letters testamentary or other authority, a copy of the filed Form 706, delivery evidence, and any IRS correspondence. The personal representative should coordinate with the surviving spouse and future tax preparers.

Limitations of portability

Portability does not transfer a deceased spouse’s generation-skipping transfer tax exemption. It also does not provide the same asset-management, creditor, remarriage, or appreciation planning that a properly designed trust may provide. The DSUE amount is generally based on the last deceased spouse rule; a later marriage and death can change which spouse’s unused exclusion is available. State estate or inheritance taxes may have separate portability rules or none at all.

A bypass trust may capture appreciation outside the surviving spouse’s estate and can preserve family control, but it requires administration and may use the first spouse’s exclusion. Portability can be simpler and preserve flexibility, yet only if the election is filed. Many plans use both a trust and portability as complementary tools. The right choice depends on estate size, state law, family structure, asset growth, and the couple’s goals.

Example and timing checklist

Suppose a decedent dies with an estate below the federal Form 706 filing threshold and has made no taxable gifts. The surviving spouse later expects substantial asset growth. If the executor files a complete Form 706 within five years and follows Revenue Procedure 2022-32, the estate may preserve the decedent’s unused exclusion even though no estate tax was due. If the estate was actually required to file, the simplified procedure is unavailable and the original deadline matters.

At death, determine whether Form 706 is mandatory, whether portability is desired, the original due date and extension, who is authorized to act, and whether the estate can prepare a complete return. If a deadline has passed, calculate the fifth anniversary immediately and confirm eligibility for simplified relief. Do not wait until the surviving spouse’s own estate planning becomes urgent.

Common mistakes

Common mistakes include assuming portability is automatic, believing no tax due means no return is needed, applying the five-year rule to a mandatory-filing estate, and submitting an incomplete Form 706. A survivor also may incorrectly assume a prior spouse’s exclusion remains available regardless of later remarriage and death. Revenue Procedure 2022-32 is relief for a defined class, not a blanket extension.

For a CFP exam question, determine the estate’s statutory filing requirement, whether an election was timely, whether the executor qualifies for the simplified procedure, the five-year deadline, and what portability does not cover. Keep the gift and estate tax portability analysis separate from GST exemption and state law.

Practical planning checkpoint

Portability also matters when the surviving spouse makes taxable gifts. If DSUE is not properly elected, the survivor may have only their own exclusion available even though the first spouse left substantial unused exclusion. A later Form 706 filing should not be delayed merely because the survivor is healthy or the estate appears modest: the survivor’s gifts, asset growth, remarriage, and federal exclusion changes can make the election valuable.