Portability Still Matters, Even With a $15 Million Exemption
A surviving spouse can capture the deceased spouse's unused exemption only by filing an estate tax return, and relief for a late election runs five years. With a permanent $15 million exemption the stakes have changed, but the election is still worth making.
When the federal exemption was scheduled to fall by half at the end of 2025, every surviving spouse had an obvious reason to capture the deceased spouse's unused exemption. The 2025 law removed the cliff and set the exemption at $15 million per person, indexed, permanently.1 Some families have concluded that portability no longer matters. For many of them that is wrong.
What portability is
Portability lets a surviving spouse add the deceased spouse's unused exclusion amount, called the DSUE, to her own. If the first spouse died with an $8 million estate and a $15 million exclusion, the surviving spouse can use the remaining $7 million for lifetime gifts or at her own death, on top of her own exemption.2 Nothing happens automatically. The executor of the first spouse's estate must file a federal estate tax return, Form 706, and make the election on it, even if the estate is far below the filing threshold and owes no tax.3
The five year window
The return is ordinarily due nine months after death. For an estate that was not otherwise required to file, the Service allows a late portability election on a return filed within five years of death, marked at the top as filed under the revenue procedure, with no private letter ruling and no user fee.4 A surviving spouse whose husband or wife died in late 2021 or later and whose estate filed nothing may still be inside that window. After five years the only route is a private letter ruling, which is slow and expensive and not assured.
Why it still matters at $15 million
- Growth. A survivor with $12 million today may have $25 million at death. Exemption is measured at death, and a $7 million DSUE is $7 million of additional shelter whatever the survivor's estate becomes.
- Life insurance and retirement accounts. Many estates that look modest are not, once the death benefit and the IRA are counted.
- Lifetime gifts. The survivor may use the DSUE for gifts during life, and the rules apply the DSUE before the survivor's own exemption, so the survivor's own exemption remains intact.5
- Remarriage. The DSUE is from the last deceased spouse. If the survivor remarries and the new spouse dies first, the first spouse's DSUE is lost, but the survivor keeps whatever she used for lifetime gifts before that happened.6 That is another reason to use the DSUE for gifts early.
- State estate tax. Several states with their own estate tax do not allow portability, which is a separate reason to consider a credit shelter trust at the first death rather than relying on the election.
What portability does not do
The generation skipping transfer tax exemption is not portable. A first spouse's unused GST exemption dies with him, which is why families with dynasty trust goals still fund a trust at the first death and allocate GST exemption to it rather than leaving everything outright to the survivor.7 Portability also does nothing for the appreciation that occurs in the survivor's hands, while a credit shelter trust funded at the first death removes that growth from the survivor's estate.
The practical advice
File the return. For a surviving spouse within five years of the first death whose estate filed nothing, the cost of a portability return is small against the value of $7 million or more of exemption, and the decision cannot be revisited once the window closes. For couples planning now, decide deliberately between portability and a credit shelter trust, or build the documents so that the survivor can choose, rather than letting the default decide.
Notes
- I.R.C. section 2010(c)(3), as amended by Pub. L. 119-21, section 70106 (July 4, 2025). ↩
- I.R.C. section 2010(c)(2) and (c)(4). ↩
- I.R.C. section 2010(c)(5)(A); Treas. Reg. section 20.2010-2(a). An estate not otherwise required to file may report most marital and charitable deduction property at an estimated value under the simplified method of section 20.2010-2(a)(7)(ii). ↩
- Rev. Proc. 2022-32, 2022-30 I.R.B. 101. ↩
- Treas. Reg. section 25.2505-2(b). ↩
- I.R.C. section 2010(c)(4)(B)(i); Treas. Reg. section 20.2010-3(a)(2) and (b). ↩
- I.R.C. section 2631; the DSUE defined in section 2010(c)(4) applies only to the estate and gift tax. ↩
Terry L. (T. L.) Turnipseed, J.D., LL.M., CTFA, is a tax, trust and estate attorney in Fort Lauderdale, Florida, and Head of Estate and Tax Planning at Alta Trust Company. He is a former tenured professor of law at Syracuse University. Reach him at tl@turnipseed.law or on LinkedIn. This article is general information, not legal advice.