Portability - Why You May Want to File a 706

Portability allows the first spouse to die to transfer any unused federal estate and gift tax exclusion to the surviving spouse. This unused exclusion is technically referred to as the Deceased Spousal Unused Exclusion Amount, or DSUE. Portability is an important estate planning tool for married couples because it can significantly increase the amount of wealth that may pass free of federal estate and gift tax. Portability was enacted as part of the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 and applies to married individuals dying on or after January 1, 2011. It was later made permanent by the American Taxpayer Relief Act of 2012.

The federal estate and gift tax exclusion amount is adjusted annually for inflation. For 2026, the basic exclusion amount is $15 million per individual, increased from $13.99 million in 2025. When the first spouse dies and leaves assets to the surviving spouse, those assets generally pass free of federal estate tax under the marital deduction. By properly electing portability, the deceased spouse’s unused exclusion amount may be transferred to the surviving spouse. Depending on the circumstances, this can allow married couples to potentially shelter up to $30 million from federal estate and gift tax using the 2026 basic exclusion amounts, assuming both spouses have their full exclusions available.

In order for the surviving spouse to use the DSUE amount, the executor or personal representative of the deceased spouse’s estate must file a timely and properly prepared Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Part 6 of Form 706 addresses the DSUE election. In many cases, a Form 706 must be filed solely to elect portability, even when no estate tax is otherwise due. The return must generally be filed within nine months of the decedent’s date of death, although a six-month automatic extension is available if timely requested. Certain estates that did not file a timely Form 706 solely to elect portability may still qualify for relief. Under IRS Revenue Procedure 2022-32, eligible estates that were not otherwise required to file an estate tax return may make a late portability election by filing a complete and properly prepared Form 706 on or before the fifth anniversary of the deceased spouse’s death. This relief can provide an important opportunity for surviving spouses who did not initially elect portability.

Under the last deceased spouse rule, a surviving spouse may generally use the deceased spousal unused exclusion (DSUE) amount inherited from their most recently deceased spouse. Remarriage alone does not eliminate an existing DSUE amount. However, if the surviving spouse remarries and subsequently survives a second spouse, the DSUE amount available for future transfers is generally limited to that of the most recently deceased spouse. This amount is calculated based on the second deceased spouse’s applicable exclusion amount, reduced by that spouse’s taxable estate and adjusted taxable gifts, as provided under federal estate tax rules. Although previously inherited DSUE may no longer be available for future transfers, amounts properly used for taxable gifts during the surviving spouse’s lifetime are generally preserved. These rules make careful estate planning particularly important for individuals who remarry, as the timing and use of available exclusions can significantly affect future estate and gift tax liabilities.

The American Taxpayer Relief Act of 2012 also increased the Generation-Skipping Transfer tax exemption to equal the federal estate and gift tax exclusion amount, with annual inflation adjustments. However, portability does not apply to the GST exemption. If the first spouse to die does not use his or her GST exemption through appropriate estate planning, that exemption is permanently lost.

Portability planning should be considered as part of the overall estate planning process while both spouses are living. Numerous factors must be evaluated, including the value and type of assets owned, anticipated inheritances, ages of the spouses, potential growth and appreciation of assets, income tax considerations, step up in basis planning, asset protection goals, second marriages, children from prior relationships, and effective use of the GST exemption.

Trustees, personal representatives, and estate planning advisors should include a discussion of whether Form 706 should be filed following the death of the first spouse as part of their post-death planning checklist, even when no estate tax is due, to preserve the DSUE amount for the surviving spouse.