If you’re married, you can typically transfer unlimited assets to your spouse without incurring any federal gift or estate tax. However, after your spouse inherits, any properties or possessions you pass down will become part of your partner’s estate. Without a long-term plan for succession, your estate could—eventually—be subject to taxes of up to 40% of the estate’s total value.
Estate tax portability helps resolve this dilemma by letting a surviving spouse claim their deceased partner’s unused estate tax exemption. Done right, this can help ensure that your hard-earned wealth is preserved for your loved ones rather than being piecemealed by the Internal Revenue Service. Read more to learn about estate tax portability, or contact the experienced Estate Planning Lawyers at Ross & Shoalmire to speak to an attorney and schedule your initial consultation.
Defining Estate Tax Portability
In simple terms, portability is a rule that lets two spouses combine their exemptions from estate and gift tax. After one spouse passes away, the surviving spouse has the option to claim their deceased partner’s remaining, unused exemption.
Let’s say, for instance, that your spouse’s estate is entitled to an exemption of about $2 million. Since the Internal Revenue Service’s estate tax threshold for 2025 is $13.99 million, your spouse would have used only a fraction of their total exemption. Without electing portability, any unused portion of their exemption would go to waste. However, with portability, you can take your deceased spouse’s unused exemption of $11.99 million and add it to your own.
So, upon your death, your estate would be able to exempt a combined $25.98 million—nearly double the individual exemption.
Estate Tax Liability and Portability
Anyone who is wealthy or owns and controls complex assets could face risks in the form of the federal estate tax. Furthermore, even those who don’t have high-value estates may need to consider the possibility that their own assets could appreciate and potentially trigger federal taxation.
Although Texas and Arkansas don’t have any form of state-level inheritance tax, the Internal Revenue Service will still take a set percentage of any estate that is worth more than $13.99 million. Like income tax, the estate tax is graduated, with higher rates applying to larger estates. For example:
- If your estate’s value exceeds the $13.99 million estate tax exemption by between $1 and $10,000, your estate will be taxed at 18% on the excess amount.
- If your estate’s value exceeds the estate tax threshold by between $10,000 and $20,000, your estate will be subject to a flat $1,800 base tax plus a 20% tax on the excess amount.
- If your estate’s value exceeds the limit by between $20,000 and $40,000, your estate must pay a flat $3,800 and a $22 tax on the excess amount.
At the uppermost end of the scale, estates $1 million or more above the exemption limit are typically expected to pay a base tax of $345,800 and 40% on the excess amount. These tax obligations can pose problems for heirs and beneficiaries, who may have to forfeit a portion of their inheritance to cover the bill. In other words, larger estates face greater risks. Estate tax portability can help minimize these risks, but only if you take action on your estate plan before it’s too late.
The Pros and Cons of Portability
Estate tax portability doesn’t happen automatically. Instead, if you think you may need to claim a deceased spouse’s exemption to minimize your own estate taxes, you will have to file IRS Form 706, the U.S. Estate, Gift, and Generation-Skipping Tax Return. In general, you have five years from the date of a spouse’s death to file Form 706.
However, for all its simplicity, portability isn’t always the best option to reduce estate taxes. While many families only stand to benefit from portability, it has limitations and is not always the best choice for every estate. Here’s what you need to know about the advantages and the limitations of estate tax portability:
The Advantages of Estate Tax Portability
Portability is a reasonable simple, safe, and straightforward way to mitigate estate taxes before they’re ever levied. Some of the other advantages of portability could include:
- Preservation. Estate tax portability lets a surviving spouse claim their deceased partner’s exemption—an exemption that would otherwise go unused. Used in conjunction with other estate planning instruments, portability could outright eliminate an estate’s tax liabilities.
- Protection. Tax laws change each year. Although the estate tax exemption has risen year-to-year, there remains a chance that another administration could reduce the taxation threshold. However, if you elect portability now, you’ll retain the current exclusion rate.
- Profitability. If a deceased spouse leaves all of their assets to the surviving spouse, and the surviving spouse elects portability, then many different types of assets could receive a basis step-up.
Estate tax portability has several distinct advantages, but it is primarily leveraged to reduce estate tax on higher-value estates and estate assets.
The Limitations of Etate Tax Portability
Estate tax portability makes sense for affluent families, but it isn’t without its limitations, either. These limitations could include, but are not limited to, the following:
- Appreciation. If an asset or asset appreciates quickly and by a large margin, portability may not be sufficient to prevent an estate from being placed in a higher tax bracket.
- GST exemptions. Portability protects married couples and, to a lesser extent, their children. However, portability does not provide any relief from the generation-skipping transfer tax, which is levied on transfers to grandchildren and other descendants.
- State-level taxation. Texas and Arkansas don’t have any state-level estate taxes, but other states do. If you own property out of state, it may be subject to different rules and regulations. This is because, while portability can reduce federal taxation, it doesn’t typically have any impact on state-level estate and inheritance taxes.
Portability is, in sum, a strong estate planning tool that offers very precise advantages.
However, while portability can be used to reduce your estate’s tax liability, an election won’t help you overcome state-specific rules, structure your children’s inheritances, or keep your heirs out of probate. If you want a strong estate plan capable of withstanding challenges, contests, and creditor claims, you’ll most likely need to employ a wider variety of wealth preservation strategies.
Build a Stronger, Longer-Lasting Estate Plan with Ross & Shoalmire
Estate tax portability can confer significant tax advantages, but it isn’t a substitute for a stronger, longer-lasting estate plan. At Ross & Shoalmire, our team of experienced Estate Planning Lawyers have spent years helping families throughout Texas and Arkansas protect their legacies.
We could help you:
- Determine if claiming or planning for portability is in your estate’s best interests.
- Protect your estate from creditor claims and potential family feuds.
- Review and revise your existing will, trust, or other estate plan, ensuring that your estate and heirs receive every break, exemption, and marital deduction obtainable.
- Explore stronger options to condition large, asset-based inheritances, such as an irrevocable or revocable living trust.
The right to port a spouse’s unused exemption is a potentially powerful tool, but it’s a tool that only works best when it’s placed in the context of a robust Estate Plan. Our experienced Estate Planning lawyers could help ensure that you take full advantage of your exemptions while still protecting your legacy.
