Portability, a legal concept, allows a surviving spouse to use any estate tax exclusion amount left over from the first spouse to die.
It’s potentially a powerful estate planning technique, experts agree, but portability is not automatically applied. To secure it, the executor of the first deceased spouse’s estate must file a “timely and properly prepared” Form 706 — more colloquially known as an estate tax return — to proactively elect portability.
This is needed even if no estate tax is otherwise due from the first deceased spouse’s estate, which is often the case even for highly affluent couples who approach the maximum estate tax exemption. For example, a husband who dies with $5 or $6 million in assets could pass that amount to his wife, who may have $10 or $12 million to her own name.
If the wife lives another two decades and remains invested in the markets, it’s very possible that her wealth upon death will be higher than the individual exclusion amount. It could be near the maximum estate tax exemption amount for a couple, which is set at $27.98 million for 2025 and indexed to inflation. If she is able to secure portability when her husband dies, she can use his remaining estate tax exemption amount and thereby avoid potentially significant additional tax when passing wealth on to heirs.
In the experience of Ronald Siegel, a partner at Brinkley Morgan in Boca Raton, Florida, even skilled financial planning professionals and tax preparers can fail to appreciate the importance of portability — and the need to proactively claim it.
“That fact was demonstrated recently in the headline-grabbing Tax Court case of Estate of Billy S. Rowland v. Commissioner, which involved the estate of a wealthy Ohio businessman,” Siegel recently told ThinkAdvisor. “A filing mistake in that case ended up costing the heirs an additional $1.5 million in estate taxes from the surviving spouse’s estate. That’s a lot of money, but it’s a relatively small amount compared to what could be lost in the most extreme cases.”
The maximum benefit of portability is currently about $6 million in saved estate taxes, Siegel said, with this amount set to increase due to inflation adjustments. It may be hard to believe that a single filing mistake could cost a client that much, he noted, but it’s true.
How Portability Works
The standard deadline to elect portability of a deceased spouse's unused federal estate tax exemption is nine months after the date of death, Siegel recounted. A six-month extension can be requested before that date.
“Automatic in this case means that you get the extension if you file for it,” Siegel noted “There’s no need to explain why you’re seeking the extension.”
For estates not otherwise required to file an estate tax return, the Internal Revenue Service has provided a simplified method to elect portability up to the fifth anniversary of the decedent’s death. This was established by Revenue Procedure 2022-32.
“This was a really positive change by the IRS in my view,” Siegel. “It added a lot more flexibility to what was a pretty strict and even punitive framework for electing portability. People whose spouses died with estates below the filing threshold may not understand the need to file a portability-only return or may not discover the need to elect portability for a surviving spouse until after the federal estate tax return due date.”
While the process is more flexible, Siegel said, it still requires a number of important steps and considerations, especially when some of the first-to-die spouse's assets flow to anyone other than a charity or the surviving spouse. In such cases, assets that flow out of the first estate must be assigned a fair market value by a qualified professional.
“The valuation must report the fair market value of all estate assets as of the decedent's date of death,” Siegel said. “It can be expensive and time-consuming to get all the valuations on things like real estate, business interests and personal property and other valuable items.”
Notably, the IRS provides a relaxed valuation method for estates that do not otherwise need to file a tax return but are filing only to elect portability. Specifically, for assets passing to the surviving spouse or to a charity, the executor can use a good-faith estimate of the value.
Where the Rowlands Fell Short
The problem in the Rowland case, Siegel explained, is that some of the assets that were passed down by Fay Rowland, who died in 2016, went not to charity or to Billy, her surviving spouse, but to other family members. Thus, a proper valuation would have been needed for Billy Rowland to later use Fay's remaining exemption of $3.7 million.
In addition, Fay Rowland’s estate executor applied for an automatic extension to file Form 706 but did not mail the return until five months after the extended deadline. Normally, late filings doom portability, but the IRS provides a safe harbor under specific Revenue Procedures.
However, this safe harbor applies only when the value of the first deceased spouse’s gross estate is less than the applicable exclusion amount ($13.99 million in 2025). That was the case for Fay Rowland, but the return must also be “complete and properly prepared.”
“Unfortunately, Fay’s return fell short,” Siegel said. “While the return was filed within the applicable two-year window, it lacked required fair market valuations for many assets. Instead, it estimated the gross estate value.”
As noted, the IRS allows simplified reporting for property passing from a nontaxable estate outright to a spouse or charity. But Fay’s trust allocated percentages to her husband and a family foundation, with the balance to grandchildren’s trusts.
“Because the spouse’s and charity’s shares directly affected what others received, full valuations were required,” Siegel said. “Fay’s return incorrectly applied the good-faith valuation exception across the board.”
As a result, the Tax Court held that the return was not “properly prepared” under Treasury regulations and could not qualify for the two-year filing safe harbor. That meant that the additional exclusion amount — worth over $3.7 million — was lost, and a tax bill of about $1.5 million was due.
“The bottom line is that this stuff is complex and the stakes can be really high,” Siegel said. “As you can imagine, it is important to work with qualified counsel and ensure you are meeting all the requirements for portability.”
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.