A “portability election” refers to the ability of a surviving spouse to claim the unused portion of the federal estate tax exemption for a deceased spouse and add this amount to the balance of the surviving spouse’s own exemption. In January of 2017, the Oklahoma Supreme Court decided a case concerning a unique aspect about the amounts in portability elections. In the case of In re Estate of Vose, the Oklahoma Supreme Court upheld a lower court’s holding that required an estate administrator to make a portability election. While this case has the potential to provide some guidance on portability elections, individuals who are engaged in the probate process should not hesitate to contact a knowledgeable estate administration attorney.
The Facts of the Vose Case
In the case of Vose, a woman and her second husband signed prenuptial agreements prior to marriage. While these prenuptial agreements covered many terms, the agreements did not discuss portability elections. After the woman’s death, the woman’s child was appointed administrator of the woman’s estate. Although the child did not agree with it, an Oklahoma court ordered the portability election for the deceased woman be given to her section husband.
The Oklahoma Supreme Court’s Decision
In reviewing the Kose case, the Oklahoma found the existence of a fiduciary duty by the estate’s administrator to the deceased woman’s husband. The Court found that the applicable section of the Internal Revenue Code grants the husband as a surviving spouse an interest in the deceased woman’s estate and that this interest exists apart from any interest that the husband might have had an heir. This duty was based on the administrator’s obligation to avoid damaging, injuring, or wasting a person’s estate as well as the interests that any other party might have in the estate.
The Lessons of Vose
Estate administrators must always remember that a portability election likely applies. As a result, administrators must remember to elect portability by filing an estate tax return on Form 706 within nine months of a person’s death. Failing to make this election has the potential to result in the surviving spouse to be faced with the entire tax burden of the couple as well as a potential lawsuit from the surviving spouse. In some cases, the Internal Revenue Service is known to grant extensions of these returns if a person can show that there was good cause for the failure to file a portability extension.
Contact a Knowledgeable Probate Attorney
The exact influence that the Kose case will have remains uncertain. The Kose decision will likely be viewed as requiring administrators to often elect portability. Despite the holding in Kose, however, courts in Oklahoma are also still likely to acknowledge that if an administrator of an estate is able to show the negative aspects of electing portability these hardships will outweigh the benefits of the exception. The Vose case, however, leaves courts with the question of how portability elections should be decided when the deceased spouse has specifically addressed this amount prenuptial or postnuptial agreement. If you live in Oklahoma and require assistance with a portability election, do not hesitate to contact a knowledgeable like Jim A Lyon. Attorney Lyon has significant experience helping individuals with bankruptcy cases.