Estate Tax Portability Explained

Estate tax portability is a rule that allows a surviving spouse to use the deceased spouse’s unused federal estate tax exemption. When the first spouse dies, their unused exemption (the difference between what they had and what they used) can be transferred to the survivor, effectively doubling their combined exemption. This requires an election on the deceased spouse’s estate tax return, even if no tax is owed.

What portability means

The federal estate tax exemption is the amount of property you can leave free of federal estate tax. In 2024, each person has an exemption of $13.61 million. If you die with an estate under this threshold, no federal estate tax is owed, regardless of who you leave it to.

Portability is an election available to married couples. When the first spouse dies, the executor can “elect portability” on the deceased spouse’s estate tax return. This preserves any unused portion of the deceased spouse’s exemption, allowing it to be used by the surviving spouse when they later die or make large gifts.

Without portability, the unused exemption would simply disappear. If the first spouse dies with a $5 million estate (well under the $13.61 million exemption), the unused $8.61 million is lost. With portability, the surviving spouse can add that $8.61 million to their own exemption, giving them $22.22 million to shield from estate tax.

This is particularly valuable in this era of high exemptions. Many couples will never owe estate tax, but the exemption is set to “sunset”—drop to about $7 million per person—at the end of 2025, unless Congress acts. Portability allows couples to plan together and protect wealth across generations without requiring a trust strategy.

The mechanics of portability

When the first spouse dies, the estate’s executor (usually the surviving spouse or an adult child) must decide whether to elect portability. The election is made by filing Form 706 (U.S. Estate Tax Return) within nine months of death. If the estate is small and no federal tax is owed, Form 706 may still be required just to elect portability; failure to file forfeits the exemption.

The Form 706 calculates the deceased spouse’s taxable estate and determines the exemption used. If the exemption is not fully consumed by the estate, the unused amount is “ported” to the surviving spouse. The IRS issues a notice acknowledging the portability election, and the surviving spouse’s future estate or gifts can use the ported exemption without further action.

Example: The portability election in action

Suppose a married couple, Alice and Bob, each have a $13.61 million exemption in 2024.

Scenario 1: Without portability. Alice dies in 2024 with a $5 million estate, left entirely to Bob. No estate tax is owed (the estate is under the exemption). The executor, however, does not file Form 706 or does not elect portability. Alice’s unused $8.61 million exemption is lost. When Bob later dies in 2026 with a $20 million estate, he has only his own $13.61 million exemption (assuming it hasn’t changed). His estate owes federal tax on roughly $6.39 million.

Scenario 2: With portability. The facts are identical, but the executor files Form 706 and elects portability. Alice’s unused $8.61 million is preserved. When Bob dies with a $20 million estate in 2026, he can apply both his own $13.61 million exemption and Alice’s ported $8.61 million, totaling $22.22 million. His estate owes no federal tax.

The difference is $2.5+ million in federal estate tax (assuming a 40% rate), all because of a single election.

Who can use portability

Portability is available only to U.S. citizens. The surviving spouse must be a U.S. citizen at the date of the deceased spouse’s death. If the surviving spouse is not a citizen, portability is not available, though a different mechanism—the qualified domestic trust (QDOT)—may allow deferral of estate tax.

If there’s no surviving spouse (e.g., both spouses die at the same time, or the first spouse was unmarried), portability does not apply.

The portability election and timelines

The election must be made on Form 706 filed within nine months of the deceased spouse’s death (or 15 months if the executor files an extension before the nine-month deadline). Missing this deadline forfeits the election and the exemption is lost permanently. There is no way to recover it.

This is why it’s critical for executors and estate planners to take note: even if no estate tax is owed, and even if the estate is small, Form 706 may be required to preserve the exemption for the surviving spouse. Many families miss this deadline inadvertently, especially when the death is simple and a tax preparer isn’t involved.

An executor should consult with a tax professional or estate attorney before the nine-month deadline to determine whether Form 706 must be filed to elect portability.

Portability and gifts during life

Portability applies only to the exemption unused at death. If the first spouse made large gifts during their lifetime, consuming part of their exemption, only the remainder is ported.

For example, if Alice gave away $10 million to her children over her lifetime (using $10 million of her exemption) and dies in 2024 with a $2 million estate, her unused exemption at death is $13.61 million − $10 million = $3.61 million. That $3.61 million is what’s ported to Bob, not the full $13.61 million.

Conversely, if Alice made no gifts and left a small estate, her entire $13.61 million unused exemption is ported.

Portability vs. traditional trust planning

Before portability existed (pre-2011), married couples had to use an “A-B trust” or “bypass trust” to preserve both spouses’ exemptions. This required careful drafting and could complicate probate and asset management.

Portability eliminated the need for this complexity in most cases. A surviving spouse can now use a simple will, leave everything to the surviving spouse, elect portability on Form 706, and the surviving spouse has access to the combined exemption. No trust is required.

However, trusts still serve other purposes: avoiding probate, managing assets if the survivor becomes incapacitated, and providing for grandchildren or other heirs beyond the surviving spouse. Portability is a tool, not a replacement for comprehensive estate planning.

Sunset and future exemptions

The current exemption of $13.61 million per person is scheduled to sunset at the end of 2025, reverting to approximately $7 million per person (adjusted for inflation) unless Congress extends it. This creates urgency: if a couple with a large estate wants to lock in the higher exemption, they may want to make large gifts or trusts before year-end 2025.

Portability does not change this timeline. If the first spouse dies in 2024, the $13.61 million exemption is ported. If the first spouse dies in 2026, the exemption at that time (likely ~$7 million, if the sunset occurs) is what’s ported.

Other portability issues

Remarriage: If the surviving spouse remarries and their new spouse dies, the new spouse’s unused exemption can also be ported to the surviving spouse. However, the ported exemption from the first spouse can still be used; portability does not “replace” the first ported exemption.

Non-citizen spouses: A non-citizen spouse cannot use portability, but a qualified domestic trust (QDOT) can defer estate tax until the surviving spouse’s death, providing similar protection.

State estate taxes: Portability applies only to federal estate tax. Many states have their own estate tax and do not conform to federal portability rules. A surviving spouse may still face state tax, even if the federal exemption is preserved.

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