When a spouse dies, the last thing their surviving spouse wants to worry about is estate taxes. The latest change by the IRS gives some grieving spouses more time—up to five years—to get advice from their estate planning attorney on how to best manage through the complexities of estate tax law.
In most situations, a surviving spouse will inherit a significant part or all of the estate of their spouse, and receives those funds, up to a certain amount per person, tax-free, using the marital deduction or the available estate tax exemption in effect at the time the first spouse passes away. The current estate tax exemption is $12.06 million per person, though under current law that exemption will be reduced to $6.2 million per person on January 1, 2026. It’s also possible to carry over an unused estate tax exclusion by filing for portability. In the past, many families missed the two-year window to file for portability. Now, that window has been extended to five years.
An example of how this works: A spouse passes. She leaves $10 million to her spouse and $2.06 million to her children. If her spouse files for portability, he can add the $10 million of the unused exclusion amount to his estate, bringing the total amount that is protected from estate taxes at his passing to $22.06 million.
The reason this is important: federal estate tax is assessed at 40%. So, if the executor of the first spouse fails to file for portability and they die with assets that are higher than the per-person exclusion at the time of their death, the assets that exceed the per-person exclusion will be taxed at 40%.
This is why it’s crucial to seek the advice of your estate attorney upon the death of a spouse so that your attorney can recommend whether a portability election is necessary or advisable in your specific case.
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