For married couples developing an estate plan, one of the most powerful but often underutilized tools in federal estate tax planning is portability. Understanding how portability works, who it benefits, and how to implement it properly can make the difference between preserving millions in tax exemptions or facing avoidable estate tax liability.
If you’re in Southlake, TX, or surrounding communities like Keller, Grapevine, Trophy Club, Westlake, or Colleyville, understanding portability can help you and your spouse take full advantage of federal tax benefits—especially if you’re planning for a high-value estate.
What Is Portability?
Portability refers to the ability of a surviving spouse to use any unused portion of their deceased spouse’s federal estate tax exemption. As of 2025, the federal estate tax exemption is expected to be approximately $6.8 million per individual, down from its 2024 high of over $13 million due to sunset provisions in the Tax Cuts and Jobs Act.
If portability is elected properly, a married couple can effectively double their estate tax exemption—meaning they can shield up to $13.6 million from estate taxes as a couple (based on 2025 projections).
How Portability Works in Practice
Let’s say one spouse dies in 2025 and uses only $3 million of their federal estate tax exemption (perhaps by leaving assets directly to their spouse, which is tax-free). If their executor files a timely estate tax return and elects portability, the remaining $3.8 million exemption can be transferred to the surviving spouse.
Now, the surviving spouse’s estate would benefit from their own $6.8 million exemption plus the $3.8 million of their deceased spouse’s unused exemption—for a total of $10.6 million in estate tax protection.
This strategy can be especially powerful when the surviving spouse’s estate increases significantly over time or if the value of assets like real estate or business interests appreciates.
Key Requirements to Elect Portability
- File Form 706 (Estate Tax Return): Even if an estate isn’t taxable, the executor of the deceased spouse must file a federal estate tax return (Form 706) within nine months of death (with a possible six-month extension).
- Make the Portability Election: The executor must explicitly elect portability on Form 706. If they don’t, the unused exemption is lost forever.
- Work with a Qualified Estate Planning Attorney: Filing Form 706 is complex. Many families overlook the need to file because they assume it’s unnecessary if no estate taxes are due—only to later discover the lost opportunity.
Why Portability Matters in 2025 and Beyond
The importance of portability is increasing due to expected reductions in the estate tax exemption. Under current law, the elevated exemption from the 2017 tax reform is scheduled to sunset at the end of 2025. Without new legislation, the exemption will revert to 2010 levels—roughly $5 million per person, adjusted for inflation.
This means more estates could become taxable, especially for families with significant real estate holdings, business assets, or retirement accounts. Portability helps safeguard against these changes by locking in the unused exemption amount of a deceased spouse, even if the law changes later.
When Portability May Not Be Enough
While portability is a valuable tool, it has limitations:
- No Portability for Generation-Skipping Tax (GST): The GST exemption does not carry over between spouses. If your estate plan includes transfers to grandchildren or more remote beneficiaries, you’ll need other strategies.
- Asset Growth May Outpace Exemption: If the surviving spouse lives for decades and their estate grows substantially, even a portable exemption might not be enough to avoid taxes.
- State Estate Taxes: Texas does not have a state estate tax, but if you or your spouse owns property in states that do, those assets may still be taxable at the state level—regardless of portability.
Strategic Planning Tips
- File Form 706 Even for Modest Estates: It costs more upfront but could save millions later if asset values grow.
- Use Credit Shelter Trusts (Bypass Trusts): In some cases, using a trust to hold the deceased spouse’s assets can provide better long-term tax protection and creditor protection, even though it means forgoing portability.
- Combine Portability with Lifetime Gifting: Making lifetime gifts, using the annual gift tax exclusion, or leveraging trusts can further reduce the taxable estate.
- Plan for Future Law Changes: Work with a local estate planning attorney to build in flexibility, such as trust protector clauses or discretionary provisions.
Final Thoughts
Portability is a powerful tool for married couples who want to maximize their estate tax exemption and protect future generations from unnecessary taxes. However, it’s not automatic. Proper elections must be made, and decisions must be integrated into a broader estate planning strategy that reflects both spouses’ goals and financial realities.
In the Southlake, TX area and beyond, families with growing or high-net-worth estates should take time now to understand their options—especially before sunset provisions change the estate planning landscape.
Legal Disclaimer
This blog is for educational purposes only and does not constitute legal advice. Estate planning laws are complex and subject to change. You should consult with a licensed estate planning attorney in your state to ensure your plan is properly structured and aligned with your long-term goals.
Peabody Law | Southlake, TX
Peabody Law provides estate planning services to clients in Southlake, Trophy Club, Keller, Westlake, Colleyville, and Grapevine, with a focus on tax-efficient wealth transfer strategies. Whether you’re starting a plan or updating it after a spouse’s passing, we’re here to help.