Estate tax portability lets a surviving spouse inherit whatever federal estate and gift tax exemption their deceased spouse didn’t use, on top of their own. For 2026, each person has a $15,000,000 basic exclusion, so a married couple who handles portability correctly can shield up to $30,000,000 from the 40% federal estate tax. The carried-over figure is called the Deceased Spousal Unused Exclusion, or DSUE. It is not automatic. The executor of the first spouse to die must file a federal estate tax return and affirmatively elect it, even when the estate owes no tax.1Office of the Law Revision Counsel. 26 US Code 2010 – Unified Credit Against Estate Tax
What the DSUE Is and How It’s Calculated
The DSUE is whatever remains of the deceased spouse’s basic exclusion after subtracting the taxable estate and any lifetime taxable gifts. For a death in 2026, start at $15,000,000. Subtract the value of real estate, accounts, investments, business interests, and other property, minus allowable deductions for debts, administrative costs, and charitable bequests. Then subtract lifetime taxable gifts. A gift is taxable only to the extent it exceeded the annual gift tax exclusion in the year it was made — $19,000 per recipient for 2026.2Internal Revenue Service. What’s New – Estate and Gift Tax
A simple example. A spouse dies in 2026 with a $6,000,000 taxable estate and $1,000,000 in prior taxable gifts. The DSUE is $15,000,000 minus $6,000,000 minus $1,000,000, or $8,000,000. That $8,000,000 transfers to the surviving spouse and sits on top of the survivor’s own $15,000,000.
Deductions carry real weight in this calculation. Executor commissions, attorney fees, appraisal costs, court fees, the marital deduction for property passing to the surviving spouse, and the charitable deduction for bequests to qualifying organizations all reduce the taxable estate and therefore raise the DSUE. Claiming every legitimate deduction produces a larger exemption for the survivor to use later.
Filing Form 706 to Make the Election
The election is made by filing IRS Form 706, the federal estate tax return, and completing Part 6 to report the basic exclusion, the taxable estate, and the resulting DSUE.3Internal Revenue Service. Instructions for Form 706 This is the step most families skip when the estate is under the filing threshold, on the reasonable-sounding logic that no return is required if no tax is due. That logic forfeits the election. Once made, it’s irrevocable; once the window closes without it, the DSUE is gone.
The executor needs a full inventory of assets valued at fair market value as of the date of death. Professional appraisals are the norm for real estate, closely held businesses, and other hard-to-value property. Prior gift tax returns (Form 709) fill in the taxable-gift figures.
Simplified Valuation for Portability-Only Returns
Estates filing Form 706 solely to elect portability, rather than because their size requires a return, get a break. For property that qualifies for the marital or charitable deduction, the executor can report a good-faith estimate of value instead of obtaining a formal appraisal. The estimate has to reflect genuine due diligence and remains subject to penalties, but the shortcut can save thousands in appraisal fees.3Internal Revenue Service. Instructions for Form 706 The simplified approach doesn’t apply if the estate needs a valuation for alternate valuation, special-use valuation of farm or business property, or installment payment of estate tax.
Deadlines, Extensions, and Late Elections
Form 706 is due nine months after the date of death. Filing Form 4768 before that deadline buys a six-month extension, for a total of fifteen months.4Internal Revenue Service. Instructions for Form 706
Missing both deadlines is not always fatal. Revenue Procedure 2022-32 allows estates that were not otherwise required to file — meaning the gross estate plus adjusted taxable gifts fell below the basic exclusion amount — to make a late portability election up to five years after the date of death.5Internal Revenue Service. Revenue Procedure 2022-32 The return must carry the notation “Filed Pursuant to Rev. Proc. 2022-32 to Elect Portability under section 2010(c)(5)(A)” at the top.3Internal Revenue Service. Instructions for Form 706
Estates that were required to file a return in the first place do not qualify for the five-year window. For them, a missed deadline usually means a lost election, and the only remaining route is a private letter ruling from the IRS. That process is expensive and no sure thing.
Who Qualifies
Three conditions have to line up. The couple must be legally married when the first spouse dies; the IRS looks to the law of the jurisdiction where the marriage was celebrated, and common-law marriages count if the state that recognized them treated them as valid. Domestic partnerships and civil unions that don’t qualify as marriages under federal law don’t trigger portability.
The deceased spouse must have been a U.S. citizen or U.S. resident at death. An executor for a nonresident noncitizen decedent cannot make the election.3Internal Revenue Service. Instructions for Form 706
The surviving spouse faces a separate citizenship question. A nonresident noncitizen surviving spouse generally cannot use the DSUE unless a tax treaty with their country of citizenship provides for it.3Internal Revenue Service. Instructions for Form 706 When the surviving spouse is a noncitizen living in the United States, the unlimited marital deduction doesn’t apply directly and the DSUE typically flows through a Qualified Domestic Trust (QDOT), with adjustments when the trust terminates. Couples in that situation need targeted advice; the mechanics don’t fit into a general portability answer.
How the Surviving Spouse Uses the DSUE
Once elected, the DSUE stacks on top of the survivor’s own basic exclusion. A $8,000,000 DSUE plus a $15,000,000 personal exclusion means the surviving spouse can transfer up to $23,000,000 tax-free, whether through lifetime gifts or at death.
An ordering rule controls the sequence. When the surviving spouse makes taxable gifts, the DSUE is drawn down first, before any of the survivor’s own exclusion is touched.6eCFR. 26 CFR 25.2505-2 – Gifts Made by a Surviving Spouse Having a DSUE Amount Available That preserves the survivor’s personal exemption for as long as possible. The sequence is automatic. The surviving spouse doesn’t choose which pot to draw from.
One consequence often catches families off guard: the DSUE is frozen at the dollar figure fixed in the year of the first spouse’s death. It does not adjust for inflation. A widow whose husband died in 2020 with $8,580,000 of exclusion unused carries that same $8,580,000 forever, while her own exclusion continues to rise with inflation. Over a long widowhood, the gap can grow considerably.
The Last Deceased Spouse Rule and Remarriage
A surviving spouse can only use the DSUE from the most recently deceased spouse. Remarriage on its own doesn’t change anything — the rule shifts when a subsequent spouse actually dies. A widow with a $10,000,000 DSUE from her first husband who remarries and then loses her second husband, whose estate left a $3,000,000 DSUE, replaces the first figure with the second. The $10,000,000 is gone.1Office of the Law Revision Counsel. 26 US Code 2010 – Unified Credit Against Estate Tax
One planning move some advisors suggest: a survivor with a large DSUE from a first marriage can use it through lifetime gifts before remarrying. Gifts already made aren’t clawed back when the last-deceased-spouse identity changes. Timing and documentation matter, and this is territory for a qualified estate planning attorney rather than a self-help decision.
What Portability Doesn’t Cover
Portability is a federal estate and gift tax rule. Two other transfer taxes work differently, and assuming portability handles them leads to expensive surprises.
State Estate Taxes
About a dozen states and the District of Columbia levy their own estate taxes, many with thresholds well below the federal $15,000,000. Hawaii is the only state that offers its own portability. Elsewhere, the state exemption belongs to the individual and dies with them. A couple in a state with a $2,000,000 estate tax threshold cannot lean on federal portability to solve that state’s tax, and typically needs trust-based planning at the first death.
Generation-Skipping Transfer Tax
The generation-skipping transfer (GST) tax applies when wealth moves to grandchildren or more remote descendants. Each person has a GST exemption — $15,000,000 for 2026 — but the GST exemption is not portable. Unused GST exemption disappears at the first spouse’s death unless it’s allocated through trusts. Families focused on multi-generational transfers cannot rely on portability alone for this piece.
Portability or a Credit Shelter Trust
Before portability became permanent in 2013, credit shelter trusts (also called bypass or family trusts) were the standard tool for preserving both spouses’ exemptions. The first spouse’s exemption funded a trust that stayed outside the survivor’s taxable estate. That approach still has advantages portability cannot replicate.
The biggest one is growth. Assets placed in a credit shelter trust at the first death, plus every dollar of appreciation on those assets, sit permanently outside both estates. With portability, the DSUE is frozen at a fixed dollar figure. If the surviving spouse inherits everything outright and those assets double over 15 years, the entire appreciated value remains in the survivor’s taxable estate.
Credit shelter trusts also offer protection from creditors, lawsuits, and the financial risks that can follow remarriage, and because the GST exemption isn’t portable, a trust at the first death is the practical way to allocate it for grandchildren and later generations.
The tradeoff is complexity and cost. A credit shelter trust needs drafting, funding, and ongoing administration. Portability requires one Form 706. For couples whose combined estate sits well within the doubled exemption, with no state estate tax pressure and no multi-generational goal, portability alone often suffices. For larger or more complex estates, the two approaches usually work in combination.
The 2026 Exclusion
The basic exclusion is $15,000,000 per person for 2026, set by the One, Big, Beautiful Bill Act signed into law on July 4, 2025.2Internal Revenue Service. What’s New – Estate and Gift Tax Without that legislation, the exclusion would have reverted to roughly half its 2025 level when the Tax Cuts and Jobs Act provisions expired at the end of 2025.
The DSUE, though, is always locked to the exclusion in effect during the year the first spouse died. A survivor whose partner died in 2018 when the exclusion was $11,180,000 carries forward that era’s unused portion. It doesn’t retroactively climb to $15,000,000. That mismatch between older DSUE amounts and today’s exclusion is one more reason the portability-versus-trust decision benefits from professional review while both spouses are alive.