Ask F+H: The Power of Portability: A Spouse’s Hidden Tax Opportunity
Dear Friedman + Huey,
My husband Earl passed away earlier this year, and while I’ve received a lot of support and advice from my financial advisor and attorney, I’m worried there might be some tax-related steps I’m missing. I heard something about filing an estate tax return even if no tax is owed, something to do with “portability”? Can you help me understand this and whether I should be doing it? My husband had assets of around $10,000,000 when he died, and we live in Illinois.
— Widowed but Wise
Dear Widowed but Wise,
Losing a spouse is one of life’s most difficult transitions, and it’s completely understandable to feel overwhelmed, especially when it comes to the fine print of financial and tax matters.
Portability is a lesser-known but incredibly valuable tax planning opportunity that often gets overlooked by financial professionals who may not have a good understanding of the benefits of portability or even possibly your husband’s net worth when he died.
Portability is a concept tied to the Federal estate tax. The estate tax is a tax on the right to transfer property at death. The IRS currently allows each person an exemption of $13,990,000 (2025 figure) to leave assets to family free from any tax upon a person’s death. Many estates are well under $13.99 Million threshold; however, if a person’s assets exceed $13.99 Million upon death, their executor or estate is required to file a Federal Form 706 United States Estate Tax Return and possibly pay estate tax. If a married person dies with assets under the exemption amount, the deceased spouse’s estate is allowed to file an estate tax return in order to give their surviving spouse a “credit” for future use based on the unused portion of a deceased spouse’s remaining exemption. This is known as portability. For example, if your husband had $10 million in assets when he died, you can file an estate tax return to claim the remainder of your husband’s unused exemption and add it to your own exemption for future use upon your death. By doing this, you can potentially shield your entire estate from any future estate taxes by porting some or all of your husband’s exemption over to you.
Here’s the catch: the executor of your husband’s estate must file IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. The return is due 9 months after your spouse’s death. Even if your husband’s estate didn’t owe any tax, filing this form is the only way to lock in portability. If you missed the 9-month deadline, the IRS now allows estates that were under the estate exemption to file and make a portability election as long as the estate files within 5 years of the first spouse’s death, so it’s not too late even if you missed the 9-month deadline.
If you and your husband don’t have a combined net worth of $14 million today, that’s okay! Portability is about planning for the future. If your assets grow, or if estate tax laws change (and they often do), having that extra exemption could save your heirs a fortune.
I also want to note that Illinois does not have this concept of portability. In Illinois, each person is allowed an exemption of only $4 million. If your husband’s assets exceeded this amount, it sounds like you will need to file an Illinois estate tax return, although it is possible no tax will be due depending on how your husband’s estate plan was structured.
You’re already ahead of the curve by asking this question. If your husband passed away recently (or within the past 5 years) and his assets exceeded $10 million, you can talk to a tax advisor at Friedman + Huey to see if filing an estate tax return for portability makes sense for your situation. Filing an estate tax return might feel like one more task during a difficult time, but it’s a powerful way to protect your and your husband’s financial legacy.
Warmly,
Friedman + Huey
