Estate Tax Portability
Estate tax portability is a provision that lets a surviving spouse "inherit" their deceased spouse's unused federal estate tax exemption — potentially shielding up to $30 million in combined wealth from estate tax under 2026 rules. Without portability, a married couple could only protect up to one exemption's worth of assets held at the first spouse's death; with portability, the surviving spouse can add the deceased spouse's unused exemption (the "DSUE") to their own, effectively doubling the protection. To lock in portability, the executor of the deceased spouse's estate must file Form 706 (the federal estate tax return) within 9 months of death — even if no estate tax is owed, even if the estate is worth $2 million. Failing to file that return forfeits portability permanently. The portability election is particularly valuable for married couples with combined estates in the $15-$30 million range who might not need complex trust structures if they simply elect portability. Note that portability applies only to the most recently deceased spouse — if the surviving spouse remarries and the second spouse dies, the DSUE resets to the second spouse's unused amount.
Current Law (2026)
Portability allows a surviving spouse to use the deceased spouse's unused estate tax exemption (DSUE), effectively doubling the couple's federal shield to roughly $30 million.
| Parameter | Value |
|---|---|
| Must file Form 706 | Yes, even if no estate tax is owed |
| Filing deadline | 9 months after death (6-month extension available) |
| DSUE amount | Deceased spouse's unused exemption ($15M minus taxable estate/gifts, for 2026 decedents) |
| Remarriage | DSUE from most recent deceased spouse only |
| Gift tax | DSUE can be used during lifetime for gift tax purposes |
Legal Authority
- 26 U.S.C. § 2010 — Unified credit against estate tax (portability of DSUE amount)
- IRC Section 2010(c)(4) — Deceased Spousal Unused Exclusion Amount
- IRC Section 2010(c)(5) — Election by executor
How It Works
The Deceased Spousal Unused Exclusion (DSUE) is the deceased spouse's basic exclusion amount minus whatever was used for taxable gifts and the taxable estate — the leftover exemption. If the first spouse dies in 2026 with a $15 million exclusion but only $4 million in a taxable estate, the DSUE is $11 million; the surviving spouse then has their own $15 million plus the $11 million DSUE for $26 million combined. Critically, the DSUE is calculated using the exclusion amount at the time of the deceased spouse's death, not the current year — so a DSUE from a 2020 death reflects the 2020 exemption of $11.58 million, not 2026 values. Electing portability requires the executor to file Form 706 — the full federal estate tax return — within 9 months of the date of death (extendable to 15 months), even if the estate is far below the taxable threshold and no estate tax is owed. This is the most commonly missed step: families with small estates don't realize they're forfeiting the portability election when they skip the return. Filing fees and preparation costs typically run $5,000–$15,000. IRS Revenue Procedure 2022-32 provides late-filing relief: for estates below the filing threshold, a Form 706 filed solely for the portability election is accepted up to 5 years after the decedent's death with no private letter ruling required. After five years, a PLR (expensive and uncertain) is the only option.
Two planning issues matter for surviving spouses. The most-recently-deceased spouse rule means portability follows the last marriage: if a surviving spouse remarries and the new spouse dies, the DSUE resets to the second spouse's unused exclusion — the first spouse's DSUE is permanently gone. High-net-worth clients who remarry need specific planning around this, including potentially using the first spouse's DSUE through lifetime gifts before remarriage. Portability vs. credit shelter trusts is the second issue: before portability was created in 2010, the standard technique was funding the deceased spouse's exemption into a bypass trust at death, keeping appreciation outside the surviving spouse's estate. Portability is simpler but misses the appreciation benefit — assets passed outright to the surviving spouse appreciate inside their taxable estate, while assets in a credit shelter trust appreciate permanently outside it. For wealthy couples with large portfolios and long time horizons, the appreciation advantage of trust-based planning can be substantial. Many advisors recommend both: elect portability at the first death AND fund a credit shelter trust.
How It Affects You
If your spouse died within the past 5 years: File Form 706 within 9 months of death to elect portability (or use the late-election procedure under Rev. Proc. 2022-32 if within 5 years), even if the estate owes no estate tax and is below the exemption threshold. This is the only way to lock in the deceased spouse's unused exclusion (DSUE) for the surviving spouse's future use. A Form 706 filed solely for portability typically costs $5,000–$15,000 in professional fees — trivial compared to preserving up to $15 million in additional exemption. If you miss the 9-month deadline, Rev. Proc. 2022-32 provides simplified late-election relief for estates below the exemption amount, generally available within 5 years of death.
If you're doing estate planning as a married couple: Portability effectively doubles your combined federal shield to approximately $30 million in 2026 without requiring a credit shelter trust. Before portability (pre-2011 law), both spouses' exemptions required a mandatory bypass trust at the first death. Portability simplifies this, but trust-based planning still offers advantages that portability doesn't: asset protection from creditors, keeping post-death appreciation outside the surviving spouse's estate, control over ultimate distribution in blended families, and generation-skipping transfer benefits. Which approach is right depends on your asset level, family structure, and state estate tax exposure.
If you're in a state with its own estate tax: Only Connecticut offers state-level portability. In every other state with an estate tax — Massachusetts, Oregon, Washington, Minnesota, and others — the deceased spouse's unused state exemption is permanently lost if not used. State exemptions are often much lower ($1–2 million) than the federal level, so a couple with a $4 million estate that's below the federal threshold may still face state estate tax without a credit shelter trust. Married couples in estate tax states should review both federal and state planning options together.
If you're worried about future exemption changes: The 2026 exemption of $15 million per person was preserved and increased by the One Big Beautiful Bill (2025). However, future Congress could reduce the exemption again. A portability election locks in the DSUE amount at the time of the first spouse's death, regardless of subsequent changes in the exemption level — giving the surviving spouse some protection against future legislative reductions. This makes timely filing even more valuable in periods of potential policy change.
State Variations
Only Connecticut offers state-level portability. All other states with estate taxes do NOT allow portability — the deceased spouse's unused state exemption is lost. This means state-level estate planning may still require trusts even though federal portability exists.
Implementing Regulations
- 26 CFR Part 20 — Estate tax regulations (§§ 20.2001-2, 20.2010-1 — valuation of adjusted taxable gifts, unified credit against estate tax including portability of deceased spousal unused exclusion amount)
- 26 CFR Part 1 — Income tax regulations (§§ 1.1014-10, 1.691(c)-1 — basis of property acquired from decedent consistent with estate tax return, deduction for estate tax attributable to income in respect of a decedent)
Pending Legislation
- HR 1301 (Rep. Feenstra, R-IA) — Death Tax Repeal Act: would repeal the federal estate and GST taxes, add a $10M lifetime gift exemption and transition rules for some trusts. Status: Introduced.
- S 587 (Sen. Thune, R-SD) — Death Tax Repeal Act of 2025: repeals federal estate and GST taxes, replaces with retooled gift tax regime including $10M lifetime exemption and new 18%–35% rate brackets. Status: Introduced.
- HR 601 (Rep. Arrington, R-TX) — Estate Tax Rate Reduction Act: would set a uniform 20% tax on estates, gifts, and generation-skipping transfers. Status: Introduced.
- HR 4330 (Rep. Jacobs, D-CA) — Early Childhood Education Trust Fund: would cut estate/gift tax exemption to $7M and fund early childhood programs with estate tax revenue. Status: Introduced.
- SJ Res 72 (Sen. Whitehouse, D-RI) — Would nullify IRS rule updating estate tax closing letter user fees. Status: Introduced.
Recent Developments
- TCJA exclusion made permanent (or extended) — portability value at an all-time high: The TCJA's doubled estate tax exclusion — which was scheduled to sunset after December 31, 2025 and revert to approximately $7 million (inflation-adjusted pre-TCJA level) — was extended or made permanent as part of the One Big Beautiful Bill Act (OBBBA) reconciliation process. With the basic exclusion at $15 million per individual for 2026, a married couple's combined portability-enabled shield reaches $30 million. Estates between $7M–$15M (single) or $14M–$30M (married) that were uncertain about estate tax exposure pre-OBBBA now clearly fall below the exclusion. Portability elections that preserve the DSUE for the surviving spouse remain valuable — the surviving spouse's own estate may grow over time, and having the additional DSUE cushion is insurance against an estate growing past the exclusion before the survivor's death.
- Treasury anti-clawback regulations protect pre-sunset gifts: IRS final regulations (T.D. 9884) issued in 2019 established that gifts made under the higher TCJA exclusion will not be "clawed back" if the exclusion drops in the future and the taxable estate is lower than the total gifts made. With the TCJA extended, the clawback risk has been eliminated for the current extension period. However, the anti-clawback reg remains important for those who made large gifts during 2018–2025 before the extension was certain — those gifts are protected regardless.
- Portability vs. bypass trust strategy: simplified planning now viable for many: The old estate planning standard was to always use a bypass trust (credit shelter trust or "B trust") to capture the first-to-die spouse's exemption, because portability didn't exist (pre-2013) or had sunset risk. With portability now permanent at high exclusion levels, many married couples with combined estates under $25–28 million can plan with portability alone — simpler, less costly administration, no trust required at first death. The bypass trust remains superior for: (1) state estate tax planning (most states don't recognize portability), (2) estates that want exclusion amount locked at first death rather than surviving to changes in law, (3) asset protection from surviving spouse's creditors, (4) blended families where controlling ultimate disposition matters.
- Late-election relief remains broadly available under Rev. Proc. 2022-32: Estates that missed the 9-month portability election deadline can still file a late Form 706 under the simplified procedure in Rev. Proc. 2022-32, if they file within 5 years of the decedent's date of death. This applies only if the estate was not otherwise required to file Form 706 (i.e., was below the filing threshold). The simplified procedure doesn't require private letter ruling fees — a practical relief that has helped many families who weren't aware of the portability election requirement at the time of a first spouse's death.