What is a “Portability Election”?

The recent tax law change permanently increased the federal estate and gift tax exemption to $15 million per person for 2026 and later. This means you can give away while alive and/or bequeath at death this amount of money or property free of federal estate and gift tax.

If you’re married, you and your spouse each get a $15 million exemption. Thus, for a married couple, your combined estate and gift tax exemption is $30 million for 2026 (it’s adjusted for inflation each year).

However,  married couples don’t automatically get the combined exemption of up to $30 million. Rather, when one spouse dies, the executor of their estate must file an estate tax return, even if it isn’t otherwise required, and make a “portability election,” that is, they must direct the IRS to “port” (transfer) the deceased spouse’s unused exemption to the living spouse.

Why does this matter? Because circumstances change. A surviving spouse’s assets may grow significantly due to business success, investments, inheritance, or even future changes in the law that reduce the exemption amount.

• Without the portability election, the unused exemption is permanently lost.

• With it, the surviving spouse may preserve millions of dollars in additional tax-free protection.

  
  

The filing deadline for the portability election is generally nine months after death (with a six-month extension available). Even estates below the filing threshold can use a simplified Form 706 if the sole purpose is to elect portability. But if the return is not properly filed within the allowable window, the opportunity disappears forever.

A recent Tax Court case shows that making a portability election can be fraught with risk.

To make filing an estate tax return solely to elect portability as simple as possible, the IRS allows the executor to use a simplified reporting procedure and provide a single estimate of the entire estate’s value instead of providing fair market values of all the estate’s assets.

Key point. The executor can use simplified reporting only if the entire estate is left to the surviving spouse and/or to charity. 

The Tax Court (in Estate of Rowland) recently held that the executor improperly used simplified reporting where a deceased spouse left property in trust to grandchildren. As a result, the court disallowed the executor’s portability election, and the surviving spouse lost the deceased spouse’s then $3.7 million unused estate tax exemption, resulting in $1.5 million in extra estate tax due when the surviving spouse died.

This case is a wake-up call to all married couples and their estate planners. Portability offers the simplest planning strategy to maximize the couple’s combined exclusion amount. But the executor of the deceased spouse’s estate must follow the proper reporting procedures to make a valid portability election.