October 3, 2012
Form 709--2012 Gift Tax Return
On September 18, 2012, the IRS issued a draft of the 2012 Gift Tax Return. There is a new spot in Part 1 to report any Deceased Spousal Unused Exclusion (DSUE) amounts that you received from a predeceased spouse to a gift or gifts reported on the current or a previous Form 709. If you answer yes, then you have to complete new Schedule C--DSUE Amount. Notably there are several references to "see instructions" on the draft, the IRS has not yet issued the instructions.
For the following reasons, it may make sense to use the DSUE during the lifetime of the surviving spouse:
1. If the surviving spouse remarries and the next spouse dies, any remaining DSUE of the first surviving spouse will be lost.
2. When the surviving spouse makes a gift, the DSUE of the last deceased spouse is applied before the surviving spouse's own exclusion amount
3. A spouse who has had more than one predeceased spouse can use the DSUE of each surviving spouse in succession as long as the DSUE of the last deceased spouse is used before any subsequent spouse dies.
See Sharon L. Klein, IRS Posts Draft 2012 Gift Tax Return (Form 709), Wealth Strategies Journal, Oct. 3, 2012.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
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Thank you for posting this most valuable information. I can get even less sleep now having to prognosticate divorce, remarriage etc. into unused DSUE considerations. Time to up the malpractice coverage.
Posted by: Brian J. Cohan | Oct 4, 2012 8:27:07 AM