What Is Estate Tax Portability and How Does It Work?

Estate tax portability lets a surviving spouse claim whatever portion of the federal estate tax exemption their deceased spouse did not use. For deaths in 2026, each person’s basic exclusion amount is $15 million, so a married couple that handles portability correctly can shield up to $30 million from federal estate tax across both deaths.¹ The catch is that portability is not automatic. The executor of the first spouse’s estate must file a federal estate tax return and elect it, even when the estate owes no tax. Miss that filing and the unused exemption is gone for good.

The Unused Exemption That Gets Transferred

The IRS calls the transferable amount the Deceased Spousal Unused Exclusion, or DSUE. The math is simple: take the deceased spouse’s basic exclusion amount and subtract whatever portion was consumed by their taxable estate and any lifetime taxable gifts. What remains is the DSUE.¹

Say a spouse dies in 2026 with a taxable estate of $4 million and no lifetime gifts. Eleven million of their exclusion went unused. Once the executor elects portability, that $11 million DSUE is added to the surviving spouse’s own $15 million exclusion, giving the survivor a combined applicable exclusion of $26 million. The survivor’s estate would owe federal estate tax only on assets above that combined figure.

The $15 million figure comes from Public Law 119-21, signed on July 4, 2025, which set the basic exclusion amount at $15 million and repealed the sunset that would have cut it roughly in half. Starting in 2027, that figure is adjusted upward for inflation.²

Who Qualifies

Three conditions have to be met. A legal marriage recognized under federal law must exist at the time of the first spouse’s death. The deceased spouse must have died after December 31, 2010, when portability first took effect.¹ And the executor must timely file Form 706 and elect portability on it.

Citizenship matters. The standard rules assume both spouses are U.S. citizens or residents. When the surviving spouse is not a U.S. citizen, property generally must pass through a Qualified Domestic Trust (QDOT) to qualify for the estate tax marital deduction, with its own set of trustee, withholding, and security rules under Treasury regulations. A non-citizen surviving spouse can avoid the QDOT requirement by becoming a U.S. citizen before the estate tax return is filed, provided they were a U.S. resident continuously from the date of death through naturalization.³

How To Elect Portability on Form 706

The executor elects portability by filing IRS Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return. The election is made in Part VI. Filing a complete and timely Form 706 is itself the election; there is no separate application beyond the return.⁴

The return requires the deceased spouse’s Social Security number and a full inventory of estate assets valued at fair market value as of the date of death: real estate, bank accounts, investment portfolios, retirement accounts, personal property. Those values determine how much of the basic exclusion was consumed and how much remains as the DSUE.

A common and expensive misunderstanding: many executors assume Form 706 is only for large estates that owe tax. It is not. Even when an estate is well below $15 million and owes nothing, the executor still has to file Form 706 to preserve the DSUE. Skip it and the unused exemption vanishes.

Simplified Valuation for Portability-Only Returns

When an estate falls below the filing threshold and the return is filed solely to elect portability, the IRS lets the executor use a simplified valuation for property that qualifies for the marital or charitable deduction. Instead of a precise appraisal, the executor reports a good-faith estimate and enters a figure from a table of estimated value ranges in the Form 706 instructions.⁴ This cuts the cost of the return significantly, since appraisals for real estate and closely held business interests are among the most expensive parts of preparation. The relaxed rule only applies to property going to the surviving spouse or charity. Assets passing to anyone else still need accurate valuations, and the executor signs under penalties of perjury, so an estimate has to be a reasonable figure reached with due diligence.

Getting Confirmation From the IRS

The IRS does not automatically confirm that a portability election was accepted. To get written confirmation, the executor requests an estate tax closing letter through Pay.gov and pays a $56 user fee.⁵ Don’t request it until at least nine months after filing, or until transaction code TC 421 appears on the estate’s account transcript. Keep copies of the filed return, any extension request, and the closing letter. Those records may be needed decades later when the surviving spouse dies and their executor has to verify the DSUE.

Deadlines and Late-Election Relief

The standard deadline for Form 706 is nine months after the date of death. Filing Form 4768 before that deadline secures an automatic six-month extension, pushing the total window to fifteen months.⁴⁶

For estates that weren’t otherwise required to file — meaning the gross estate plus adjusted taxable gifts fell below the basic exclusion amount — Revenue Procedure 2022-32 provides a simplified way to make a late portability election by filing a complete Form 706 within five years of the date of death.⁷ This relief exists specifically for families that didn’t realize portability required affirmative action. It only applies to estates below the filing threshold. Larger estates that were required to file and missed the deadline face a much harder path through a private letter ruling.

The Last Deceased Spouse Rule

A surviving spouse can only use the DSUE from their most recently deceased spouse. Outliving two or more spouses does not let the survivor stack DSUEs. The law replaces the earlier DSUE with whatever the most recent deceased spouse left behind, even if that amount is smaller or zero.⁸

This creates a real trap for people who remarry. A widow with an $11 million DSUE from her first husband remarries; her second husband later dies with an unused exclusion of only $3 million. The moment he dies, he becomes her last deceased spouse, and her available DSUE drops from $11 million to $3 million. The first husband’s larger DSUE is gone.

There is one planning workaround. The surviving spouse can apply the first spouse’s DSUE to lifetime gifts before the second spouse dies. Once the DSUE has been used on completed gifts, that tax benefit is locked in regardless of what happens later. The regulations treat the DSUE as consumed before the surviving spouse’s own exclusion, which means strategic gifting between marriages can preserve an otherwise vulnerable amount.⁸

Using the DSUE for Lifetime Gifts

The DSUE doesn’t just sit waiting for the surviving spouse to die. It can be applied to lifetime gifts, reducing or eliminating federal gift tax on transfers made during the survivor’s life. Under the regulations, the DSUE is treated as consumed first, before the surviving spouse’s own basic exclusion.⁸ That ordering rule is what makes gifting the practical defense against the last deceased spouse trap.

When a Credit Shelter Trust May Beat Portability

Portability is simpler than the traditional credit shelter trust (also called a bypass trust), but simpler is not always better. A trust can outperform portability in several situations.

The DSUE doesn’t grow with inflation. Once locked in, its dollar amount stays fixed. Assets placed in a credit shelter trust at the first death can appreciate over decades, and that growth passes to heirs sheltered from estate tax. For younger surviving spouses, the difference compounds.
The generation-skipping transfer tax exemption is not portable. A credit shelter trust can be structured to use the deceased spouse’s GST exemption, protecting assets that skip a generation. Portability offers no equivalent.
Assets left outright to a surviving spouse are exposed to their creditors and to any future spouse’s claims. A trust keeps those assets separate.
In blended families, portability gives the surviving spouse full control over the DSUE and full discretion over who benefits from it. A trust can direct the first spouse’s exemption toward the first spouse’s children.

Many estate plans use both, funding a credit shelter trust up to a chosen amount and treating portability as a backstop for whatever exemption the trust doesn’t consume.

State Estate Taxes Are Separate

Portability is a federal benefit only. States that impose their own estate taxes generally do not let a surviving spouse inherit any unused state-level exemption. About a dozen states and the District of Columbia levy estate taxes, often at exemption thresholds far below the federal $15 million. A couple comfortably below the federal threshold can still face a state estate tax bill, and no amount of federal portability planning will address it. In those states, plan with an attorney who works with both the federal DSUE and the state’s separate system.

1
Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax
2
Internal Revenue Service. What’s New – Estate and Gift Tax
3
Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust
4
Internal Revenue Service. Instructions for Form 706
5
Internal Revenue Service. Frequently Asked Questions on the Estate Tax Closing Letter
6
eCFR. 26 CFR 20.6081-1 – Extension of Time for Filing the Return
7
Internal Revenue Service. Rev. Proc. 2022-32
8
eCFR. 26 CFR 25.2505-2 – Gifts Made by a Surviving Spouse Having a DSUE Amount Available