Portability: An Estate Tax Exemption That Could Save Your Family Millions

At Summitry, we’re all about helping families maximize what they pass on to loved ones. If you’re married and getting your estate plan in order, there’s one word you need to know: portability. It has the potential to save you millions in estate and gift tax, and it’s surprisingly straightforward if you know how to use it.

What Is Portability?

Portability is a federal tax rule that lets a surviving spouse inherit any unused estate tax exemption from their deceased spouse. In 2025, the federal estate tax exclusion is $13.9 million per person, up from $13.6 million in 2024. If your spouse doesn’t use up their full exemption when they pass, you can tack their leftover amount onto your own exemption. That means you could potentially shield over $27.98 million from federal estate taxes as a couple.

How Does Portability Work?

Here are the basics:

Spouse #1 passes away: Their estate uses up part (or none) of their $13.9 million exemption.

File the paperwork: The executor files IRS Form 706 and elects portability within nine months of death (extensions are possible).

Spouse #2 gets the difference: The surviving spouse adds the unused exemption to their own, giving them a much bigger shield against federal gift and estate taxes when their time comes.

A Real-World Example

Let’s put this into perspective:

As a hypothetical example, John and Mary are married Californians. John dies in 2025, leaving $5 million to their kids and $8.99 million to Mary. The $8.99 million is not taxed due to the marital deduction.

John’s estate uses $5 million of his $13.99 million exemption. That leaves $8.99 million unused. Mary’s executor files Form 706, electing portability. Now, Mary has her own $13.99 million exemption plus John’s $8.99 million, for a total of $22.98 million.

During Mary’s lifetime, her wealth continues to grow. Mary passes away with an $18 million estate. Thanks to portability, her entire estate passes to heirs free of federal estate tax.

Without portability? Mary would only have her $13.99 million exemption, and $4.01 million would be taxed (somewhere between 18% and 40%).

Why Should You Care?

The most immediate benefit is the ability to double your federal estate tax exemption. Together, a couple could shield up to $27.98 million from federal estate taxes by using portability. This means that, with the right planning and by filing the necessary paperwork, you and your spouse can pass on a significant amount of wealth to your heirs without triggering a hefty tax bill.

Portability also streamlines the estate planning process. In the past, couples often needed to create complex trusts—like credit shelter or bypass trusts—just to make sure both spouses’ exemptions were fully used. With portability, the surviving spouse can simply inherit any unused exemption from the first spouse to pass away, making the process more straightforward and reducing the need for intricate legal structures.

Another major reason to care about portability is its ability to “future-proof” your estate plan. Even if the surviving spouse’s estate grows over time, or if Congress lowers the exemption amount in the future (as is scheduled for 2026), the exemption transferred through portability is locked in at the higher amount available at the time of the first spouse’s death. This provides serious peace of mind knowing that your family’s tax protection is preserved even if the law changes or your assets appreciate more than expected.

What’s the Catch?

1. Portability is not automatic: You have to file IRS Form 706 and elect portability by a certain date, which is generally 9 months after the decedent’s death. It’s always a good idea to work with your financial advisor to ensure you meet deadlines.

2. Federal only: California doesn’t have its own estate tax, but states like Maryland, Rhode Island, Connecticut, Vermont, and more do, as well as their own exemptions.

3. GST tax not included: Portability doesn’t apply to the generation-skipping transfer (GST) tax.

4. Already transferred the wealth? You should still file. Even if no estate tax is due for spouse #1, filing Form 706 is still required to elect portability and transfer any unused exemption to the surviving spouse. If you expect the surviving spouse’s wealth to increase substantially (think real estate or inheritance from another source) this could push them over the threshold.

Are Your Estate Assets Protected?

Given how quickly tax laws and exemption amounts can change, working with a knowledgeable financial advisor or estate planning attorney is more important than ever. A professional can help you navigate complex regulations so you don’t miss critical deadlines like the portability election, and tailor your estate plan to your unique family and financial situation. With the scheduled changes to the federal estate tax exemption on the horizon, having expert guidance means you’ll be prepared for whatever comes next—and your legacy will be protected for generations to come.

Portability is one of the most powerful tools for married couples to maximize what they leave behind. But it’s not automatic, and you have to take action. At Summitry, we help clients make smart moves like this every day. If you want to make sure your estate plan takes full advantage of the rules, let’s talk.

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Disclaimer: This material is intended for general informational purposes only, and should not be construed as legal, tax, investment, financial, or other advice. It does not consider the specific investment objectives, tax and financial condition or needs of any specific person. While information in this content comes from reliable sources, no guarantee of accuracy or completeness is provided.