With today’s $15 million federal estate and gift tax exemption ($30 million for married couples), it’s easy to believe estate tax planning is no longer a concern. But a recent Tax Court case proves otherwise—an estate lost $1.5 million simply because a portability election was not properly and timely filed.
Here’s the key issue: When the first spouse dies, any unused estate tax exemption can be transferred to the surviving spouse—but only if the executor files a timely and properly completed Form 706 and elects portability. This is true even when no estate tax is owed.
Why does this matter? Because circumstances change. A surviving spouse’s assets may grow significantly due to business success, investments, inheritance, or even future changes in the law that reduce the exemption amount.
- Without the portability election, the unused exemption is permanently lost.
- With it, the surviving spouse may preserve millions of dollars in additional tax-free protection.
The filing deadline is generally nine months after death (with a six-month extension available). Even estates below the filing threshold can use a simplified Form 706 if the sole purpose is to elect portability. But if the return is not properly filed within the allowable window, the opportunity disappears forever.
The lesson is simple: if you are married, make sure your executor understands the importance of filing Form 706 and electing portability—no matter how modest the estate may seem today.
