Portability: The Free $15M Election Widows Lose by Skipping a "Pointless" 706

A widow whose husband died in 2024 with a $2 million estate owes no estate tax. Her advisor tells her not to bother with a Form 706: the estate is nowhere near the filing threshold, and the return costs a few thousand dollars in professional fees. She lives another twenty years. Her concentrated stock position and the family real estate compound the estate well past her own exclusion, and her children write a seven-figure check to the IRS.

That check was avoidable. The husband died with more than $11 million of unused exemption sitting on the table. Portability would have let his widow keep it, for the price of a "pointless" return nobody filed.

What is portability and how does the DSUE amount work?

Portability lets a surviving spouse add the deceased spouse's unused exclusion (the "DSUE amount") to their own estate- and gift-tax exemption. It was made permanent by the American Taxpayer Relief Act of 2012 and is codified at §2010(c)(2)-(5).

Each person has a basic exclusion amount: $15 million per individual for decedents dying in 2026, the figure set by the One Big Beautiful Bill Act of 2025, indexed for inflation in later years. Without portability, whatever exemption the first spouse to die doesn't use simply disappears. With portability, the surviving spouse can stack the unused portion on top of their own.

The mechanics:

• The first spouse dies. Suppose they used only $1 million of their $15 million exclusion.
• The executor makes a portability election, which fixes the DSUE amount at roughly $14 million.
• The surviving spouse now has their own $15 million plus the $14 million DSUE, roughly $29 million of combined shelter, usable during life (gifts) or at death.

The DSUE is frozen at the dollar figure computed on the first death; it does not grow with inflation. The survivor's own basic exclusion continues to adjust annually.

How does a surviving spouse actually elect portability?

Portability is elected by filing a complete and timely Form 706 (United States Estate Tax Return) for the first spouse to die, even when no tax is due and no return would otherwise be required. There is no separate election box that stands alone: filing the 706 is the election, per Reg. §20.2010-2(a)(1).

Two points trip people up:

1. The election is affirmative but the opt-out is easy. Filing a timely, complete 706 elects portability by default. To not elect it, the executor must affirmatively opt out on the return.
2. "Complete" gets a break for portability-only returns. Under Reg. §20.2010-2(a)(7)(ii), an estate filing solely to elect portability generally does not have to report the value of property passing to the surviving spouse or to charity that qualifies for the marital or charitable deduction; you can estimate those values within ranges. That materially lowers the cost of the return.

The executor files. If there's no appointed executor, a "non-appointed executor" (typically the surviving spouse) can file under Reg. §20.2010-2(a)(6).

What is the deadline to file for portability?

The normal deadline is nine months after the date of death, extendable to 15 months with a Form 4768 (§6075(a); Reg. §20.6075-1). But for portability-only estates, those not otherwise required to file a 706, Rev. Proc. 2022-32 grants an automatic extension through the fifth anniversary of the decedent's death.

This is the most useful thing to know in this entire article. If a spouse died within the last five years, holding an estate below the filing threshold, and no 706 was filed, you can very likely still make the election. The procedure:

• File a complete Form 706 within five years of death.
• Write "FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER §2010(c)(5)(A)" at the top of the return.

No user fee, no private letter ruling. Rev. Proc. 2022-32 replaced the old two-year window precisely because the IRS was drowning in 9100-relief letter-ruling requests from estates that missed the deadline. If you're past the five years, relief now requires a PLR under Reg. §301.9100-3, which carries a user fee and is far from guaranteed.

The exemption is high now. Doesn't that make the 706 pointless?

The opposite, and this is the reasoning that costs families the most. The 2025 tax law set the exclusion at $15 million per person and eliminated the scheduled sunset, so more advisors than ever are telling surviving spouses the return is a waste of money. Three reasons that advice ages badly:

• The DSUE is use-it-or-lose-it, at any exemption level. A surviving spouse who lives twenty or thirty more years can watch a modest estate compound past any threshold. The election window closes five years after the first death; the growth doesn't stop on that schedule.
• An elected DSUE is protected; an unelected one is gone. Reg. §20.2010-1(c), the anti-clawback rule, confirms that a DSUE properly elected is not retroactively reduced if the law later lowers the exemption. Congress set the current figure; a future Congress can cut it. The elected number holds either way. The unelected number never existed.
• State estate taxes don't care about the federal figure. Several states impose their own estate tax with far lower thresholds and no portability. A family comfortably under the federal exclusion can still have a state-level problem the planning conversation should catch.

Elections nobody made because the estate "obviously" owed nothing are among the most expensive misses in estate administration. Portability is the textbook case.

Portability vs. a credit-shelter (bypass) trust

Portability made the old bypass trust optional, not obsolete. Each tool wins in different fact patterns.

Factor	Portability (DSUE)	Credit-shelter / bypass trust
Cost and complexity	One 706, no ongoing trust	Trust drafting, funding, annual trust returns
Shelters appreciation after first death	No; DSUE is frozen	Yes; trust growth stays out of survivor's estate
Second basis step-up on trust assets	Yes (assets in survivor's estate)	No (trust assets not in survivor's estate)
GST exemption	Not portable	Preserves first spouse's GST exemption
Creditor / remarriage protection	None	Yes
Risk of DSUE loss on remarriage	Yes; see below	No

The DSUE is only from the "last deceased spouse" (§2010(c)(4)(B)). If a widow remarries and the second husband dies leaving little or no DSUE, she can lose the first husband's DSUE. That single rule is why bypass trusts still earn their fee in blended-family and remarriage-likely situations.

The tradeoff practitioners underrate: assets in a bypass trust do not get a second step-up in basis at the survivor's death, while assets covered by portability (they sit in the survivor's own estate) do. For families whose estate is comfortably under the combined exemption, the income-tax cost of losing that step-up can dwarf any estate-tax benefit of the trust. Run the basis math, not just the estate-tax math.

Who should file even when it "makes no sense"?

Any surviving spouse whose combined family assets could plausibly grow past one exclusion amount should file to elect portability, even from a small first estate. The cost of a portability-only 706 is modest; the forfeited exemption is not recoverable after five years without a PLR.

The realistic candidates:

• Surviving spouse with a growing business, concentrated stock, or real estate that could appreciate past the exemption.
• Any couple whose combined net worth is within striking distance of a single exclusion (about $15 million).
• Younger widow or widower with decades of compounding ahead.
• Families in a state with its own estate tax and a much lower threshold.

Whether portability, a bypass trust, or both fits depends on the specific estate, the state estate-tax regime, and family dynamics. Coordinate with the estate attorney before the nine-month clock runs. And if a spouse died in the last five years without a 706, check Rev. Proc. 2022-32 before assuming the door is closed.

Sources

• IRC §2010(c)(2)-(5): basic exclusion, DSUE, and last-deceased-spouse rules
• One Big Beautiful Bill Act (2025): $15 million basic exclusion for 2026, indexed thereafter; no scheduled sunset
• IRC §6075(a): estate tax return filing deadline
• Reg. §20.2010-1(c): anti-clawback (no retroactive reduction of DSUE)
• Reg. §20.2010-2(a)(1), (a)(6), (a)(7)(ii): portability election, non-appointed executor, and completeness relief
• Reg. §20.6075-1: filing period and Form 4768 extension
• Reg. §301.9100-3: discretionary relief for late elections (PLR)
• Rev. Proc. 2022-32: automatic five-year extension for portability-only returns
• Form 706 (United States Estate Tax Return); Form 4768 (extension)