{"id":4588,"date":"2026-04-09T19:09:56","date_gmt":"2026-04-09T19:09:56","guid":{"rendered":"https:\/\/getirshelp.com\/blog\/?p=4588"},"modified":"2026-05-21T19:26:57","modified_gmt":"2026-05-21T19:26:57","slug":"estate-tax-portability-election-form-706-mistakes","status":"publish","type":"post","link":"https:\/\/getirshelp.com\/blog\/estate-tax-portability-election-form-706-mistakes\/","title":{"rendered":"Do Not Make This Costly Portability Election Mistake on Form 706"},"content":{"rendered":"

I’m Darrin Mish. Tampa tax attorney, 32 years in, more than $100 million in IRS debt resolved.<\/strong> What follows isn’t theory – it’s what I’ve actually watched work.<\/p>\n\n

Here is a million-dollar mistake that gets made every single day in this country. A spouse passes away. The surviving spouse assumes that because the estate is below the filing threshold, no estate tax return is needed. So they do not file one.<\/p>

And just like that, they lose the deceased spouse’s entire estate tax exemption. In 2025, that is up to $13.99 million in sheltered wealth – gone. Forever. No do-overs. No appeals. Just gone.<\/p>

The portability election is the mechanism that allows a surviving spouse to use the deceased spouse’s unused estate tax exemption. It is one of the most valuable tools in estate planning. And it is not automatic. You have to affirmatively elect it by filing Form 706, the United States Estate Tax Return – even if the estate owes zero tax.<\/p>

What Portability Actually Does<\/h2>

Under IRC Section 2010(c)(5), the executor of a deceased spouse’s estate can elect to transfer the unused portion of the decedent’s applicable exclusion amount to the surviving spouse. This is called the Deceased Spousal Unused Exclusion, or DSUE.<\/p>

In plain English, here is how it works. In 2025, every person has a $13.99 million estate tax exemption. If a husband dies and his taxable estate is worth $4 million, he used $4 million of his $13.99 million exemption. The remaining $9.99 million is “unused.”<\/p>

With a proper portability election, that $9.99 million transfers to the surviving wife. She now has her own $13.99 million exemption plus the $9.99 million DSUE – a combined $23.98 million in estate tax protection.<\/p>

Without the portability election? The wife only has her own $13.99 million exemption. The husband’s unused $9.99 million disappears into thin air. If the wife’s estate eventually exceeds $13.99 million at the time of her death, her heirs pay 40% estate tax on every dollar above the exemption. That is a bill that could easily exceed $2 million – all because nobody filed a form.<\/p>

The OBBBA Changed the Numbers – Permanently<\/h2>

This matters even more now because of the One Big Beautiful Bill Act signed on July 4, 2025. The OBBBA permanently set the estate tax exemption at the higher level – $15 million per person in 2026, indexed for inflation going forward. Before the OBBBA, the exemption was scheduled to drop back to roughly $7 million per person in 2026 when the TCJA provision was set to sunset.<\/p>

That means portability is now a permanent planning tool, not a temporary one dependent on political winds. The combined exemption for a married couple in 2026 will be approximately $30 million. But only if you actually elect portability when the first spouse dies. The high exemption amounts make it easy to think portability does not matter for “regular” families. But estates grow. Real estate appreciates. Retirement accounts compound. Life insurance pays out. What seems like a modest estate today could be well above the exemption threshold in 20 or 30 years.<\/p>

The Filing Deadline That Cannot Be Missed<\/h2>

To elect portability, the executor must file Form 706<\/a> within nine months of the date of death. An automatic six-month extension is available by filing Form 4768 before the nine-month deadline expires. That gives you a maximum of 15 months from the date of death.<\/p>

Miss both deadlines? Under Revenue Procedure 2022-32, there is a five-year late filing window<\/a> – but only if the estate was below the filing threshold and had no other obligation to file Form 706. This relief is not guaranteed, and it requires a complete Form 706 with a specific statement at the top of the return. After five years from the date of death, the DSUE is permanently and irrevocably lost.<\/p>

I cannot stress this enough. When a spouse dies and the estate is below the filing threshold, most families assume nothing needs to be filed. That assumption is costing American families millions of dollars every single year. The cost of filing Form 706 for portability – typically a few thousand dollars in professional fees – is infinitesimal compared to the potential estate tax savings.<\/p>

The Simplified Reporting Trap<\/h2>

Here is another mistake I see constantly. When an estate files Form 706 solely for portability – not because it owes estate tax – the IRS allows simplified reporting for certain assets. This means you do not necessarily need formal appraisals for every single asset. You can use reasonable estimates for assets that are not relevant to the estate tax calculation.<\/p>

But “simplified” does not mean “sloppy.” And it definitely does not mean “incomplete.” The IRS has rejected portability elections where the Form 706 was filed with vague or missing asset descriptions. A recent Tax Court case found that an incomplete Form 706 cost a family $1.5 million in excess estate taxes because the portability election was deemed invalid due to insufficient information.<\/p>

You still need to list all assets with reasonable descriptions and values. Real property needs at least a tax assessment or comparable sales analysis. Financial accounts need statements showing date-of-death values. Business interests need a reasonable valuation methodology, even if it is not a full formal appraisal. The simplified reporting provisions give you flexibility on methodology, not permission to skip the work entirely.<\/p>

Five Common Portability Mistakes<\/h2>

Mistake 1: Not filing at all.<\/strong> This is the big one. The estate is under the threshold, so nobody files Form 706, and the DSUE is lost forever. I have seen this happen with estates worth $5 million, $8 million, even $12 million. The families had no idea what they gave up until the surviving spouse’s estate plan was being prepared years later – and by then it was too late.<\/p>

Mistake 2: Filing without actually electing portability.<\/strong> Form 706 gives you the option to elect or not elect portability. If you file the form but do not check the right box, or if you affirmatively opt out of the election, the DSUE does not transfer. This sounds like something that could never happen in the real world. It happens more than you would think, usually when someone tries to prepare the form without professional help.<\/p>

Mistake 3: Incomplete or sloppy returns.<\/strong> As I mentioned, the IRS can reject a portability election if the Form 706 is materially incomplete. Asset schedules with “various personal property – $50,000” are not going to survive IRS review. Be specific enough for the IRS to determine the estate’s value and calculate the resulting DSUE amount.<\/p>

Mistake 4: Missing the deadline without filing an extension.<\/strong> Nine months goes fast, especially when a family is grieving and dealing with the logistics of losing a loved one. If you know you cannot file<\/a> the complete Form 706 in nine months, file Form 4768 for the automatic six-month extension before the initial deadline passes. It takes 10 minutes and buys you critical time.<\/p>

Mistake 5: Ignoring portability for “small” estates.<\/strong> I hear this one a lot: “The estate is only $2 million, portability is not worth the hassle.” Think about that for a moment. A $2 million estate means the surviving spouse could be giving up $11.99 million in unused exemption. At a 40% estate tax rate, that unused exemption could shield up to $4.8 million in wealth from taxation. Filing Form 706 costs a few thousand dollars in professional fees. That is a return on investment that would make any investor jealous.<\/p>

Special Situations to Watch For<\/h2>

Remarriage.<\/strong> If the surviving spouse remarries and the new spouse later dies, a new portability election can be made for the new spouse’s unused exemption. However, the DSUE from the first deceased spouse is generally replaced by the DSUE from the most recently deceased spouse. This means remarriage can actually reduce your total available exemption if you are not careful. Careful planning before remarriage can preserve the original DSUE through other means, such as using it to fund a credit shelter trust.<\/p>

Pre-TCJA deaths.<\/strong> If a spouse died before 2018 when the exemption was much lower (around $5.49 million in 2017), the DSUE amount is frozen at the amount available at the time of death. It does not increase with inflation adjustments. This still may be worth electing if the five-year window under Rev. Proc. 2022-32 has not yet closed.<\/p>

State estate taxes.<\/strong> Portability is a federal concept. Not all states that impose their own estate taxes recognize portability. If you live in a state with its own estate tax (like Massachusetts, Oregon, Washington, or Hawaii), you need state-specific planning in addition to the federal portability election. Do not assume that what works federally works at the state level.<\/p>

A Real-World Example<\/h2>

Here is a scenario I have dealt with personally in my practice. Husband dies in 2025 with an estate worth $6 million. Wife is the sole beneficiary. Estate is well below the $13.99 million filing threshold. The family’s accountant tells the wife no Form 706 is needed because no estate tax is owed.<\/p>

Wife lives another 15 years. During that time, the combined assets grow to $20 million through real estate appreciation, an inheritance from her own parents, continued retirement savings, and compounding investment returns.<\/p>

Without portability: Wife’s exemption (adjusted for inflation, say $18 million by 2040) covers $18 million. The remaining $2 million is taxed at 40%. Estate tax: $800,000 that did not need to happen.<\/p>

With portability: Wife’s exemption of $18 million plus the DSUE of approximately $7.99 million (the unused portion of husband’s 2025 exemption) gives her $25.99 million in protection. The $20 million estate passes to the children with zero estate tax.<\/p>

The difference is $800,000. The cost to file the Form 706 back in 2025? A few thousand dollars and a few hours of gathering asset information. That is the most profitable “paperwork” any family will ever file.<\/p>

Get Help Now<\/h2>

If you have recently lost a spouse, or if you are reviewing your estate plan and portability was never addressed, time is critical. The filing deadlines are real, the consequences of missing them are permanent, and the dollars at stake are significant. Contact the Law Offices of Darrin T. Mish, P.A. at (813) 229-7100<\/a> for a free consultation.<\/p>\n\n\n