The basic federal estate tax exclusion amount (often referred to as the estate exemption) is the amount a person can pass to their heirs tax-free through lifetime gifting or at death. Currently, the exclusion is $11.7 million per person, which means a married couple can pass a combined $23.4 million to their heirs without any estate tax. Sounds pretty good, right?

With such a high exclusion amount, many large estates are no longer required to file a federal estate tax return (or Form 706). However, there is a good reason to consider doing so for estates that exceed $3.5 million – to preserve a deceased spouse’s unused exemption amount for the surviving spouse’s later use.


Since 2010, portability of the federal estate tax exclusion between spouses has become permanent, which means a surviving spouse may take advantage of any unused exemption from a deceased spouse (known as the deceased spousal unused exemption [DSUE] amount). Portability does not happen automatically, however, and may catch a surviving spouse by surprise at their later death or as they continue to make taxable gifts during their lifetime.

In order to elect portability of the DSUE amount for the benefit of the surviving spouse, the estate’s representative must file an estate tax return and the return must be filed timely. The due date of the estate tax return, if the estate size requires it, is nine months after the decedent’s date of death, however, the estate’s representative may request an extension of time to file the return for up to six months. If a Form 706 is filed for the sole purpose to elect portability, it can be filed anytime prior to the second anniversary of the deceased spouse’s date of death.

Another benefit to electing portability of the DSUE amount is that the unused amount is applied first to future taxable gifts made by the surviving spouse. This will allow as much as possible to the survivor’s heirs with no estate tax. Let’s take a look at a typical estate to see how electing portability might be beneficial.


Conrad and Gertrude have a combined estate of $10 million and their assets are split evenly between them (or $5 million each). Conrad dies in 2021 and all his assets pass to Gertrude. His exemption is $11.7 million, so no Form 706 is required, and there is no estate tax due at his death since his estate relied on the unlimited marital deduction. If Gertrude dies in 2024, three years later, she is able to pass her entire estate ($10 million, plus any assumed modest growth) without estate tax by applying her $11.7 million exemption (although her amount will be slightly higher in 2024 due to annual inflation adjustments).


One might conclude that there is no need for either Conrad’s estate to file a Form 706 or for it to elect the portability of Gertrude’s husband’s unused exemption amount. There was no estate tax due at Conrad’s death and none due at Gertrude’s death. Why should a Form 706 be filed if there is no tax, especially if the cost to prepare such a return could reach $6,000 or more?

There are several proposals currently being discussed in Washington, D.C. which would reduce the lifetime exemption, some to as low as $3.5 million per person. Even if Congress fails to act on any of these tax proposals (when has that ever happened, right?) then the current law sunsets at the end of 2025 and the lifetime exemption will automatically drop to around $5.5 million for estates beginning in 2026. In other words, the exemption is going to decrease, even if Congress does nothing. The only questions are when and by how much?

If the DSUE amount is not claimed on a timely filed Form 706, it is permanently lost to the surviving spouse. If there is no estate tax, there will be no issue. With a decreased exemption amount, however, many estates could find themselves subjected to estate taxes that they might otherwise not have paid had portability been elected.

Let’s examine how a decrease might affect the previous example.


At Conrad’s death in 2021, there was no estate tax due and he passed all his assets to his wife, Gertrude. No election of portability of Conrad’s DSUE was made because the lifetime exemption was so high, there appeared to be no need. If the lifetime exemption at Gertrude’s death in 2024 has conservatively decreased to, say, $5 million by act of Congress, her estate of $10 million is going to face significant estate taxes. Gertrude can exempt $5 million with her own lifetime exemption, but the remaining $5 million will be subjected to a 40% estate tax rate. That’s two million dollars that Gertrude’s heirs will pay because portability was not elected at Conrad’s death!

By filing a Form 706 for Conrad’s estate and electing portability of his unused exemption amount, Gertrude would have been able to shelter her entire $10 million estate from estate taxes.


Even if a spouse’s estate does not require an estate tax return because the size of the decedent’s estate is well below the filing requirement, there is a justifiable reason to file a return anyway. The only way to elect portability of a deceased spouse’s unused exemption amount is by timely filing a Form 706. Considering the fact that the current exemption of $11.7 million will decrease in 2026, if not sooner, preserving the deceased spouse’s remaining tax exemption can provide significant estate tax savings for the surviving spouse’s estate.