Estate tax portability. The estate tax portability feature discussed in a prior Lawyers Mutual alert was made permanent by the 2012 Taxpayer Relief Act. If one spouse dies without using the full amount of his or her estate tax exclusion, the unused amount can be added to the surviving spouse’s own exclusion. Portability is preserved only if a federal estate tax return (Form 706) is timely filed for the deceased spouse. This is true even if the estate of the deceased spouse is not otherwise required to file an estate tax return. This topic is discussed in greater detail in an updated article by William T. Belcher.
Deadline for filing an estate tax return. The personal representative of a decedent’s estate must file the Form 706 within nine months of the decedent’s death (unless an extension is granted). We often see claims involving late-filed estate tax returns because the attorney mistakenly believes that the deadline runs from the date of appointment of the personal representative, rather than the date of death.
Multiple tax return filing extensions are not permitted. A personal representative is entitled to one automatic six-month extension to file a federal estate tax return. This extension is obtained by filing a Form 4768 before the original due date for the return has passed. Additional automatic extensions will not be granted.
Deadline for claiming an elective share (NCGS §30-3.4). If a surviving spouse wishes to claim his or her Elective Share rather than accepting the terms of the deceased’s will or the intestate share, this claim must be made within six months after the issuance of letters testamentary or letters of administration. The six-month time period is not tolled due to incapacity of the surviving spouse, and the claim cannot be made after the death of the surviving spouse.
Deadline for renouncing an interest in an estate (NCGS Chapter 31B). An instrument of renunciation must be filed within nine months after the date the transfer of interest was complete, subject to any conflicting federal statute. If the renunciation is timely filed, the interest devolves as if the renouncing party had predeceased the date of transfer.
Engagement letter. If you are handling an estate administration and do not intend to prepare or file an estate tax return, you should include language in your engagement letter specifically limiting your representation in this regard. You may wish to have your client acknowledge their agreement by signing the letter. Keep in mind that it may be advantageous to file an estate tax return even when it is not required because of portability. A revised sample engagement letter addressing these issues is available on Lawyers Mutual’s website.
Laura Loyek joined Lawyers Mutual as claims counsel in 2009. Her focus areas are real estate and litigation. She previously worked for the law firms of Smith Moore and K&L Gates. Laura graduated summa cum laude from Wake Forest University and cum laude from Harvard Law School. She is an active member of the North Carolina Association of Women Attorneys and the Real Property Section of the NCBA. Contact Laura at 800.662.8843 or firstname.lastname@example.org.
About the Author
Laura Loyek is a claims attorney with Lawyers Mutual, focusing in the areas of real estate, litigation, appellate law, and bankruptcy. Prior to joining Lawyers Mutual in 2009, Laura practiced for six years in the areas of complex commercial litigation and land use/zoning. Laura received her J.D. from Harvard Law School and her undergraduate degree from Wake Forest University. She is an active member of the North Carolina Association of Women Attorneys and the Real Property Section of the North Carolina Bar Association.