Portability Provision

What is Portability? Portability is a federal estate tax provision that enables a surviving spouse to inherit and utilize their deceased spouse’s unused federal estate tax exemption, known as the Applicable Exclusion Amount, to shield a portion of their estate from federal estate taxes upon their own death. Introduced under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and made permanent in 2013, portability is a critical tool in estate planning, offering married couples flexibility in maximizing tax savings without complex trust structures.

Under current federal law, each individual has an estate tax exemption (e.g., $13.61 million per person in 2025, adjusted annually for inflation). If a deceased spouse does not fully utilize their exemption at death, the unused portion, called the Deceased Spousal Unused Exclusion (DSUE) amount, can be transferred to the surviving spouse. For example, if the first spouse dies with an estate of $5 million, leaving $8.61 million of their exemption unused, the surviving spouse can add this DSUE to their own exemption, potentially doubling their tax shield. This allows the surviving spouse to transfer a larger estate to heirs tax-free.

To claim portability, the executor of the deceased spouse’s estate must file IRS Form 706 (United States Estate Tax Return) within nine months of death (or 15 months with an extension), even if no tax is due. This election is irrevocable and requires careful compliance with IRS regulations. Portability does not apply to state estate taxes or the generation-skipping transfer tax, and it is only available to the surviving spouse, not subsequent spouses if the survivor remarries.

While portability simplifies estate planning by reducing the need for bypass trusts, it has limitations. It does not protect assets from creditors or ensure control over distributions, unlike trusts. Couples must consult estate planning attorneys to evaluate portability alongside other strategies, ensuring compliance and alignment with financial goals. Disputes or errors in filing can jeopardize the DSUE, underscoring the need for precise documentation. By leveraging portability, married couples can optimize tax exemptions, preserving wealth for beneficiaries with minimal tax liability.

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