Federal Estate Tax Portability

Federal Estate Tax Portability is a significant development in federal estate tax law. In essence, if a spouse dies and has not used all of their federal estate tax exclusion, the unused portion can be rolled over and used in the surviving spouse’s estate.

Unfortunately, portability is not self-executing. It requires making an affirmative election on a timely filed federal estate tax return using IRS Form 706. This is required regardless of the size of the first spouse’s gross estate. Therefore, even “medium” sized estates should consider making this election by filing a Form 706 as an “insurance policy.” The surviving spouse’s estate could then use the exclusion if it is ever needed.

The federal estate tax law on portability can be found at 2010 (c) (5) (A) of the Internal Revenue Code.