Portability lets a surviving spouse inherit what the first spouse never used — but only if the proper paperwork is filed; the couple must understand the protocols for this use.

When a married person dies without using their full federal estate and gift tax exemption, that unused amount does not have to disappear. Under a rule known as portability, the leftover exemption — called the Deceased Spousal Unused Exclusion, or DSUE — can pass to the surviving spouse and be added to their own exemption. Handled correctly, it is one of the simplest ways a couple can materially reduce the tax exposure of their combined estate. Handled carelessly, it is lost permanently, often without anyone realizing it until it’s too late. The current federal basic exclusion amount is over $15 million per individual, made permanent by the One Big Beautiful Bill Act. A married couple where the first spouse to die used none of their exemption can, with a proper election, leave the survivor a combined shield of over $30 million. That number is attractive, but it depends entirely on one procedural step most families don’t expect: filing an estate tax return at the first death, even when no tax is owed.

4 Ways the DSUE Amount Gets Put to Work:

• 1. USE AT THE FIRST SPOUSE’S DEATH, SHELTERING THE SURVIVOR’S OWN ESTATE. The most common use. The inherited exemption stacks on top of the survivor’s own, reducing or eliminating federal estate tax when the second spouse dies.
• 2.  SHELTER LIFETIME GIFTS. Because the estate and gift tax exemptions are unified, the survivor isn’t required to wait until death to use the inherited amount. It can be applied against taxable gifts made during their lifetime — useful for moving appreciating assets, such as a business interest or investment portfolio, out of the estate early.
• 3. PAIRING PORTABILITY WITH A BYPASS TRUST. Portability and a credit shelter trust are not an either/or choice. A trust locks in the first spouse’s exemption and shelters everything the trust later earns from estate tax, protects assets from creditors, and can matter for a blended family — none of which portability alone provides, since the DSUE amount is frozen at the first death and never grows with inflation.
• 4. COORDINATE IT WITH THE GENERATION SKIPPING EXEMPTIONS. The generation-skipping transfer exemption, which shelters gifts to grandchildren and further descendants, is not portable under any circumstances. Families focused on multi-generational transfers typically still need trust planning to use both spouses’ GST exemptions, regardless of what portability provides at the estate tax level.

The mechanics matter as much as the math: an exemption that was never elected is an exemption that was never inherited.

But beware … there are limitations and protocols!

• The election isn’t automatic. The executor must file IRS Form 706 to claim portability, even for estates well under the filing threshold that owe no tax at all. Many families skip the filing for exactly that reason — no tax due — and lose the exemption without realizing it.
• The clock is real. The standard deadline is nine months after death, with an automatic six-month extension available. Estates that weren’t otherwise required to file may still elect portability up to five years after the date of death under IRS relief procedures — but that relief has its own conditions and isn’t guaranteed.
• Remarriage can erase it. Only the DSUE from the survivor’s most recently deceased spouse counts. If the survivor remarries and that new spouse also dies, the earlier banked exemption is replaced by whatever the new spouse leaves unused — for better or worse.
• It’s federal, not state. Portability has no bearing on state-level estate taxes. In states that impose their own estate tax, a bypass trust or other state-specific planning may still be necessary even with the full federal exemption preserved.
• The number is locked in. The DSUE amount is fixed based on the law at the time of the first death. If the federal exemption later increases, an already-banked DSUE does not increase along with it.

Portability is a genuine planning opportunity, but it rewards attention to deadlines and paperwork as much as it rewards good intentions. Whether it’s the right primary strategy — versus a bypass trust, or the two used together — depends on the size of the estate, the state of residence, and the family’s longer-term goals for the assets involved. We’d welcome the chance to walk through how this applies to your situation.

This advisory is provided for general informational purposes only and does not constitute legal, tax, or financial advice. Federal exemption amounts, filing deadlines, and portability rules are subject to change and depend on individual circumstances. Please consult your estate planning attorney and tax advisor before acting on any strategy described here. Contact Weiss LLP for more information.