Portability

What it means

Each person has a federal estate tax exclusion. Historically, whatever the first spouse to die did not use was lost, which is why trusts existed to catch it. Portability lets the survivor add the unused portion to their own, doubling what can pass free of federal estate tax.

It is not automatic. The unused amount has to be elected on a federal estate tax return filed for the first spouse — and the whole point is that this is an estate that usually owes no tax and would otherwise not file at all. The return is filed to make the election and for no other reason.

Missing it is recoverable in some circumstances. The IRS allows a late election by a simplified procedure within a period after the death for estates that were not otherwise required to file, and that window has been extended more than once.

It applies to the federal exclusion only. States with their own estate tax mostly do not offer portability, so a couple in one of those states may still need the trust structure that portability was supposed to replace.

Why it matters

Not filing is the default, and the default silently forfeits an exclusion that may be worth a great deal to the survivor's own estate.

It also changes the planning advice: a couple who assume portability solves the problem may be in a state where it does not.

When you are likely to meet it

• When the first of a married couple dies and the estate owes no tax.
• When deciding whether to file an estate tax return that is not required.
• When reviewing a plan built around a credit shelter trust written before portability existed.

How this varies by state

Portability is a federal rule. Most states with their own estate tax do not offer an equivalent, which is the reason the older trust structures survive in those states.

Related terms

• Elective shareA surviving spouse's right to claim a minimum portion of the estate, even if the will leaves them less or nothing.
• Estate taxA tax on the value of what somebody left, paid by the estate before anything is distributed.
• Inheritance taxA tax on what a person receives from an estate, charged to the recipient rather than to the estate — and only in a few states.
• Revocable living trustA trust you create during your lifetime, keep control of, and can change or cancel at any time. Property held in it does not go through probate.
• Step-up in basisThe tax rule that resets an inherited asset's value to what it was worth on the date of death.

Official sources

The authority this page describes, at the agency that publishes it. Sahvelo does not restate a rule from a secondary source.

• IRS — estate tax (opens in a new tab)

Sahvelo guidance that uses this

• Taxes after a death