The Cost of Portability

Portability currently grants widows and widowers the possibility of transferring up to $10.24 million tax-free. The executor of the deceased spouse’s estate must transfer the deceased spouse’s unused exclusion to the surviving spouse by filing Form 706 no later than nine months after the deceased spouse dies. A six month extension is allowed, however.

Regardless of the size of the estate, all surviving spouses must fill out the same twenty-eight page form. Additionally, the cost of preparing the form is not impacted by the net worth of the surviving spouse.  According to Jeffrey N. Pennell, a professor at Emory University School of Law, the rates for Georgia CPAs range from $3,000 to $10,000. Many law firms bill at their normal hourly rate when filling out the twenty-eight page form, which can leave a surviving spouse with a large bill for legal fees.

Surviving spouses with small estates who wish to avoid the high cost of hiring a professional to complete Form 706 can complete the form themselves. The Form is available in a downloadable PDF form on the IRS website, and it comes with forty-three pages of instructions. The IRS considers the election of portability to be automatic if the Form is filed.

See Deborah L. Jacobs, How to Get the Latest Tax Break Without Spending a Bundle on Legal Fees, Forbes, January 11, 2012.