When a loved one passes away, especially a spouse, the emotional burden can be overwhelming. Amid grief, surviving spouses are often faced with complex legal and financial decisions, many of which have long-term consequences. One critical component of estate administration that gets overlooked is the portability election of the deceased spouse’s unused federal estate tax exemption.
For married couples, understanding the estate tax exemption and the timely filing of IRS Form 706 Estate Tax Return to elect portability is essential to preserving wealth for family members and avoiding unnecessary taxes. Failure to file Form 706 correctly or on time can result in a costly loss of tax benefits.
Understanding the Estate Tax Exemption and Portability for Married Couples
Due to recent legislative changes, starting in 2026, the federal estate tax exemption is $15 million per individual (and adjusted annually for inflation), meaning an individual can pass up to that amount to heirs free of federal estate tax. For married couples, this exemption effectively doubles, allowing the couple to shield up to $30 million from estate tax, but only if portability is properly elected.
Portability allows a surviving spouse to inherit the unused portion of their deceased spouse’s estate tax exemption. For example, if a spouse passes away in 2026 having only used $3 million of their exemption, the surviving spouse can elect to “port” the remaining $12 million, adding it to their own exemption amount. This strategy is particularly useful in larger estates.
The Importance of Timely Filing IRS Form 706
To take advantage of portability, the surviving spouse must generally file IRS Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, within nine months of the decedent’s date of death. A six-month extension may be requested, but no portability election can be made if Form 706 is not filed on time.
It is a common misconception that if no estate tax is due (i.e., the estate value is below the exemption amount), there is no need to file Form 706. However, the portability election is only available if the form is properly and timely filed, even if no estate tax is owed. Missing this filing deadline or incorrect Form 706 reporting could result in the surviving spouse permanently forfeiting the deceased spouse’s unused exemption. This was made very clear in a recent tax court case (Estate of Billy S. Rowland, Deceased, James A. Park, Executor v. Commissioner of Internal Revenue, T.C. Memo. 2025-76), in which an incorrect filed Form 706 cost the decedent’s family $1.5 million in extra estate taxes which could have been avoided with a properly prepared Form 706 estate tax return.
Avoiding Mistakes: Work With Experienced Professionals
Filing IRS Form 706 is not a simple task. This form requires extensive documentation, including determining asset valuations, appraisals, tax basis information, and other financial details. Errors or omissions can flag the return for an IRS audit or invalidate the portability election.
To minimize risk and ensure compliance:
- Hire an experienced probate attorney who can guide you during the estate administration process and assist you in retaining the appropriate professionals to ensure the form is properly prepared in compliance with current laws, deadlines, and requirements.
- Engage a qualified tax professionals with expertise in IRS Form 706 reporting, who can assist in preparing accurate financial disclosures and supporting documentation, and ensure the form is completed and filed in a timely manner.
- Coordinate valuations and documentation early. Appraisals and fair market value determinations often take time and are crucial to a complete and accurate filing.
- Start early and do not delay. Waiting until the end of the filing period can leave insufficient time to gather necessary documents, increasing the risk of filing late or submitting an incomplete return.
Conclusion: Preserve Your Exemption by making a Timely Filing
The portability election is one of the most valuable tax-saving opportunities available to married couples, but it is not automatic. Timely and accurate filing of IRS Form 706 is essential to securing your spouse’s unused exemption and maximizing the tax benefits for your Estate.
Estate administration is rarely straightforward, and the decisions made in the months following a spouse’s death can have significant financial implications. By working with knowledgeable attorneys and tax professionals, surviving spouses can avoid costly pitfalls and ensure their family’s wealth is protected for generations to come.
For assistance contact attorney Jeff Cohen or contact attorney Mara Peterson to discuss how best to preserve your estate tax exemption and make informed decisions.
