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Claiming the unused exclusion from a deceased spouse

Georgia residents may not be familiar with a law passed in 2007 that allows a spouse to elect and claim the unused part of their deceased spouse's exclusion with respect to federal estate tax. The exclusion, called a DSUE, is the allowed exemption amount from estate taxes, and is currently at $5.43 million, with the amount subject to annual inflation adjustments.

When a surviving spouse chooses to elect their spouse's unused portion, they can add it to their own, potentially saving thousands of dollars in future taxes. As this portability feature has been poorly understood, many surviving spouses have failed to elect the exclusion during the 15-month period in which they could have done so. In newly released regulations, the IRS will allow surviving spouses to go back and claim the DSUE of their deceased spouse if their estate was under the exemption amount.

For people who are beyond the 15-month extended filing period and who failed to elect their deceased spouse's DSUE, the process is completed through seeking Section 9100 relief. Of course, it's best to simply file an estate tax return upon the spouse's death, as the fees associated are much higher if filing for Section 9100. Unfortunately, the IRS is much stricter about claiming the deceased spouse's DSUE for estates that exceed the exemption amount. The only avenue may be to file the estate tax return at the time of death.

It is important for people to consider all ways in which they can help avoid or reduce future taxes when they pass away. People may want to speak with their attorney about the exclusion to make certain their future executor understands what it is and that the executor must elect it. Estate tax planning can be complicated, and so the advice of an experienced attorney can be particularly helpful in this regard.

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