The Six Million Dollar Gamble

Effective January 1, 2026, the federal lifetime estate tax exclusion amount is increased to $15,000,000. For the first to die of a married couple with an estate under $15 million, are you willing to risk losing up to $6 million by not electing to file a federal estate tax return for portability purposes?

What Is Portability and Why Does It Matter?

Each U.S. citizen is entitled to a basic exclusion amount from federal estate and gift tax—$15 million per person in 2026. When the first spouse dies, any unused exclusion can be transferred to the surviving spouse, but only if the executor files a timely and complete federal estate tax return (Form 706) and elects portability. If this step is missed, the surviving spouse is limited to their own exclusion amount, and the first spouse’s unused exclusion is lost permanently.

The High Cost of Failing to Elect Portability: Estate Tax Implications for Surviving Spouses

The federal estate tax system provides a significant planning opportunity for married couples through the concept of “portability.” Portability allows a surviving spouse to utilize any unused portion of the deceased spouse’s (first to die) federal estate tax exclusion amount—known as the deceased spousal unused exclusion (DSUE). However, this benefit is not automatic. If the executor of the first spouse’s estate does not timely elect portability by filing a federal estate tax return, the DSUE is lost forever, potentially resulting in a substantial and avoidable estate tax liability for the surviving spouse’s heirs. With a current federal estate tax rate of 40%, the $15 million dollar exclusion is worth up to $6 million dollars in estate tax savings ($15mm * 40%)

A Simple Example: The Cost of Inaction

Consider a married couple, Steve Austin and Jamie Summers, each with a $15 million exclusion. Steve dies first, leaving all assets to Jamie (using the unlimited marital deduction, so no estate tax is due at his death). Jamie’s estate, after inheriting Steve’s assets, is now worth $30 million at her death.

• If Portability Is Not Elected: Jamie’s estate can only use her own $15 million exclusion. The excess $15 million is subject to estate tax. At a 40% tax rate, this results in $6,000,000 of federal estate tax.
• If Portability Is Elected: Jamie’s estate can use both her own and Steve’s exclusions, totaling $30 million. Her $30 million estate is fully sheltered, and no estate tax is due.

What if the Election for Portability was not made upon the death of the first to die?

There still may be an option to elect portability.  If, in the year of the death of the first spouse to die, a federal estate tax return was not required, there is a 2022 Revenue Procedure that allows a federal estate tax return to be filed to elect portability within five years of the first spouse’s death. After five years, the portability election cannot be made without a private letter ruling.

Conclusion

Failing to elect portability can result in hundreds of thousands—or even millions, up to $6 million— of dollars in unnecessary federal estate tax. The portability election is a critical step in estate planning for married couples. Executors and advisors should ensure this opportunity is not missed, as the financial consequences for the surviving spouse’s heirs can be severe.

No one knows the future, but if a future Congress lowers the federal estate lifetime exclusion, if your family business skyrockets in value, or the stock market continues to have 20%+ annual gains, consider that portability can save the second spouse between zero and $6 million dollars in federal estate tax (Illinois does not have portability for the Illinois estate tax, states vary in their rules). What is your risk philosophy toward federal estate taxes?

Special rules for Portability apply in remarriage situations, but if any of the above apply to your family, please reach out to your Friedman + Huey contact to discuss your estate planning needs.

For more information on Portability, please see my colleague Michelle Hanlon’s article at this link: Protect Your Legacy, Maximize Deductions, Lead with Impact