When considering estate planning, portability stands out as a powerful tax-saving tool for married couples. Portability is a provision allows a surviving spouse to inherit their deceased spouse’s unused estate tax exemption, effectively doubling the amount they can pass on tax-free to heirs.
The urgency to elect portability has never been more critical. With the estate tax exemption expected to decrease significantly in 2026, married couples must act quickly to protect their family’s financial legacy.
This article explores portability’s benefits, limitations, and the time-sensitive process for securing this valuable planning opportunity that many couples overlook.
Table of Contents
- The current estate tax landscape
- How portability fundamentally changed estate planning
- The time-sensitive nature of portability election
- The potential tax savings of portability
- Important limitations and considerations
- The process for electing portability
- When to recommend portability to clients
- Communicating the value proposition to hesitant clients
- Securing your clients’ legacy through timely action
Key takeaways
- Portability allows married couples to shield over $27 million from federal estate taxes with proper planning and execution.
- The scheduled 2026 exemption reduction creates unprecedented urgency for couples to implement portability strategies soon.
- Portability is not automatic. Failing to file an estate tax return within required time frames permanently forfeits this benefit.
- Missing the portability election could cost families millions in unnecessary taxes that cannot be recovered through other means.
The current estate tax landscape
Over the past decade, federal estate tax exemptions have reached historic highs. In 2024, individuals could shield $13.61 million from federal estate taxes, allowing married couples to protect up to $27.22 million.
For 2025, the federal estate and gift tax exemption has further increased to $13.99 million per individual, meaning married couples can now shield up to $27.98 million. This continues the trend of high exemption amounts, however, these generous exemption levels have lulled many families into a false sense of security.
Until recently, the exemption limit was scheduled to revert to roughly
$7 million per person, adjusted for inflation, at the end of 2025. This expected change would have placed previously ‘safe’ estates at threat of significant tax exposure.
However, the recent passage and signing of the “One, Big, Beautiful Bill” (OBBB) has dramatically altered the picture.
The OBBB not only prevents the scheduled sunset at the end of 2025, but permanently increases federal estate and gift tax exemptions. Beginning January 1, 2026, the federal estate and gift tax exemption will increase to $15 million per individual, or $30 million for married couples, and will continue rising (indexed for inflation) in subsequent years.
While the immediate threat of reduced exemptions is gone, the stakes for proper estate planning remain high. A 40% estate tax rate still applies to amounts exceeding the exemption, thus families could still face a major tax burden unless they maximize all available tax-exemption strategies. For a $20 million estate in 2026, the difference between proper planning and missed opportunities could mean millions of dollars.
How portability fundamentally changed estate planning
Estate planning rules underwent a seismic shift in 2010. Before then, if a spouse died without using their estate tax exemption, that valuable tax shield was lost forever. This “use it or lose it” approach often forced couples into complex planning strategies that were not aligned with their actual wishes.
The Tax Relief Act of 2010 transformed this approach by introducing portability, allowing the transfer of a deceased spouse’s unused exemption amount (DSUE) to the surviving spouse.
Later when the American Taxpayer Relief Act of 2012 made portability permanent, it created a powerful, yet frequently overlooked, planning opportunity for married couples.
In the rush to simplify estate planning, many couples squander this opportunity. Most assets passing to a surviving spouse qualify for the unlimited marital deduction, meaning no estate tax is due when the first spouses passes. While this seems advantageous at first, it often results in the first spouse’s exemption going completely unused. This missed opportunity could cost heirs millions in unnecessary taxes down the road.
The time-sensitive nature of portability election
For advisors communicating with clients about portability, highlighting its time-sensitive is crucial. Unlike many estate planning tools, portability is not automatic. Portability must be specifically elected by filing an estate tax return (Form 706), even when no tax is due at the first spouse’s death.
The standard deadline for filing Form 706 is just nine months after death. While a six-month extension is available if requested, this still creates a relatively narrow window for families dealing with the grief and day-to-day logistics of losing a loved one.
Some relief does exist for smaller estates through the Revenue Procedure 2022-32, which simplifies the procedure for estates below filing threshold. The Procedure allows portability election up to five years after death, however the deadlines are unyielding. Waiting too long could cost families millions in estate taxes.
The potential tax savings of portability
The numbers tell a compelling story about portability’s value. Consider a married couple with a $20 million estate in 2026. Failing to elect portability in this scenario could result in $5.2 million in extra estate taxes. Millions that should have gone to children, grandchildren, and charities will instead wind up with the government.
Even for estates currently below the exemption threshold, portability offers valuable insurance against future uncertainties. But keep in mind, asset appreciation, inheritances, business success, or further reductions in estate tax exemptions could push ‘safe’ estates into taxable territory.
While the surviving spouse’s own exemption continues to adjust with inflation, the ported exemption remains fixed at its death-date value which early election vital—especially in inflationary environments like we’ve seen in recent years.
When implemented properly, portability planning allows married clients to transfer their entire combined wealth to heirs without estate tax, regardless of how assets are owned between spouses. This flexibility eliminates the need for artificial asset rebalancing between spouses that was often required previously.
Important limitations and considerations
While portability offers powerful benefits, it is not a panacea. There are several important limitations. To begin with, portability applies only to the federal estate tax exemption – the generation-skipping transfer (GST) tax exemption cannot be ported to a surviving spouse.
Geography matters too. Many states, with their own estate or inheritance taxes, do not recognize portability, which creates tax liability at the state level in spite of federal exemptions Coordinating federal- and state-level implications are critical, particularly for clients in states with significant death taxes.
The timing of appreciation also matters. Portability only preserves the deceased spouse’s unused exemption amount at death, without protecting future appreciation of estate assets Rapidly-appreciating assets, like businesses, real estate, or other investments, can be particularly hard hit.
Perhaps the biggest surprises for clients, however, is how remarriage can muddy up portability. The surviving spouse can only use the exemption of their “last deceased spouse,” meaning remarriage followed by the new spouse’s death could eliminate access to the previous DSUE. This creates unique considerations for clients considering a second marriage.
The process for electing portability
Filing Form 706 to elect portability requires strict attention to detail. The process begins with gathering comprehensive asset information, determining fair market values, and calculating the deceased spouse’s unused exemption amount.
For portability-only returns where no tax is due, reporting requirements are simpler. The process for asset valuation is much easier. However, Form 706 still requires specific language to elect portability, including precise calculation of the DSUE amount on Part 6, Section C of the form.
Professional assistance from an experienced estate planning attorney or CPA typically costs between $3,000-$10,000, depending on estate complexity. While this expense gives some clients pause, this upfront cost could save heirs millions in future estate taxes.
The complexity of navigating portability makes professional guidance essential, as it requires a thorough understanding of the form’s technical requirements, various estate planning options, and different tax elections.
When to recommend portability to clients
Virtually all married clients with estates over $2 million should consider electing portability as a hedge against future asset growth and tax law changes. This figure reflects the reality of long-term asset appreciation and uncertain future legislation.
Clients with substantial retirement accounts deserve heightened attention. These assets often grow significantly during a surviving spouse’s lifetime, particularly when stretched over multiple decades. The combination of tax-deferred growth and required minimum distributions can push seemingly modest estates into taxable territory.
Business owners face unique considerations. Even if current valuations seem safely below exemption levels, the potential for substantial appreciation is often overlooked, highlighting the importance of portability election. A successful business could easily push an estate over the exemption threshold.
Age plays a critical role in portability decisions. Clients in their 50s or younger have more time for assets to appreciate beyond exemption limits. The longer the time horizon, the greater the potential benefit of securing this exemption.
Communicating the value proposition to hesitant clients
When discussing portability with clients, framing is everything. Present the portability election as an insurance policy costing a few thousand dollars that could save millions in taxes their children and heirs would otherwise pay. This perspective helps clients see beyond the immediate cost to the long-term family benefit.
The current high exemption amount presents a limited-time opportunity that may disappear after 2025 without congressional action. Use this urgency to motivate timely decision-making. Be sure to emphasize that portability represents a one-time opportunity that cannot be recovered.
Simple examples often resonate best. Show how missing portability could cost heirs $0.40 of every dollar above the exemption amount. This concrete illustration helps clients grasp the magnitude of potential savings versus the relatively modest cost of electing portability.
Securing your clients’ legacy through timely action
The decision to elect portability represents one of the highest-return estate planning strategies available to married clients given the current tax landscape. Few other planning tools offer such significant potential tax savings for such a modest upfront investment.
When you proactively discuss portability with all married clients after a spouse’s death, you demonstrate exceptional value as an advisor while potentially saving families millions in unnecessary taxation. This combination of professional excellence, tangible client benefit, and exemplifies the highest standards of estate planning practice.
Join Harness today and elevate your practice as a tax advisor. By collaborating with us, you can unlock the potential of portability strategies for your married clients, ensuring they benefit from significant tax savings. Together, we can provide exceptional value, save families millions in unnecessary taxation, and uphold the highest standards of estate planning.
Disclaimer:
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