What is portability of the estate tax exemption between spouses?

What the Law Says

Portability of the estate tax exemption is authorized under the Internal Revenue Code and allows a surviving spouse to add any unused portion of the deceased spouse’s lifetime estate and gift tax exemption to their own exemption amount.

Portability was introduced by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and made permanent by the American Taxpayer Relief Act of 2012. It applies to estates of decedents dying on or after January 1, 2011.

To elect portability, the executor of the deceased spouse’s estate must file IRS Form 706 (United States Estate (and Generation-Skipping Transfer) Tax Return) — even if the estate is below the filing threshold — and explicitly elect portability on the return. This election is not automatic.

The unused exemption (DSUE) is calculated as the difference between the basic exclusion amount applicable to the deceased spouse’s year of death and the sum of the taxable estate and post-1976 adjusted taxable gifts.

Statutory Text

In the case of a surviving spouse, the applicable exclusion amount shall be increased by the deceased spousal unused exclusion amount, if any, with respect to the last deceased spouse of the surviving spouse.

— 26 U.S.C. § 2010(c)(1) — Deceased spousal unused exclusion amount

Statutory Text

The term 'deceased spousal unused exclusion amount' means, with respect to any surviving spouse, the lesser of— (A) the basic exclusion amount, or (B) the excess of the basic exclusion amount of the last deceased spouse of the surviving spouse over the sum of the taxable estate and adjusted taxable gifts of such deceased spouse.

— 26 U.S.C. § 2010(c)(2) — Definition of DSUE

What to Do

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