Portability in Estate Planning

Most folks planning their estate, relative to Federal estate tax issues, know that because of more recent tax changes, such as the Tax Cuts and Jobs Act of 2017 and the more recent One Big Beautiful Bill Act of 2025, the exemption/exclusion that was passed avoids estate tax obligations for most estates, since a taxable estate must generally exceed 15 million today to be subject to any estate tax.

However, many taxpayers do not realize that there are many assets in the estate of a decedent that are subject to estate tax, even if the owner of the property does not focus on the item as being an estate asset.

For example, a 3 million dollar life insurance policy on the decedent and owned by the decedent would generate 3 million worth in assets that could be subject to estate tax.  Another example would be the retirement plan owned by the decedent.  If this plan had 5 million in it at the time of death of the decedent, this 5 million is part of the taxable estate of the decedent.

From the 2 quick examples noted above, the taxpayer/decedent now has an estate of 8 million.  What if the decedent also owned a house in the decedent’s name and it was valued at 5 million?  Now the estate contains 13 million in assets, without looking to other property owned by the taxpayer.

What the above should illustrate is that it is reasonable for many taxpayers to consider that they may have assets in excess of the 15 million rule, noted above.

If such assets exceed 15 million, there is concern with the tax liability.

But what if the decedent had only 6 million in the estate?  Some would argue that there is not even a reason to file a tax return for the estate, because the estate did not exceed the 15 million.  For this rule, the statement is correct.

However, the purpose of this Tip is to suggest to taxpayers and their advisers that an estate tax return (form 706) probably should be filed.  Why?  Because a relatively new rule allows the a decedent spouse to give the surviving spouse the balance of the unused portion of the noted 15 million exemption.  However, this portability, as this rule is labeled, does not apply and the decedent spouse, not using the full exemption/exclusion of the 15 million cannot give the surviving spouse the balance of the decedent’s unused 15 million if the representatives for the decedent’s estate do not timely file the 706 estate tax form.

Even though a husband and wife might see their current estate is not in excess of 15 million dollars for each spouse, it is possible the surviving spouse might have a much larger estate when the surviving spouse does. 

Morale of the story:  File a 706 to protect the portability of the estate tax exemption/exclusion.

by Dr. Mark Lee Levine, Professor, University of Denver