Estate tax exemption portability allows a surviving spouse to use their deceased spouse’s unused federal estate tax exemption, potentially doubling the amount shielded from taxation. It sounds simple, but the details can get tricky. Deadlines, remarriage rules, and state tax laws can all impact how much a family ultimately saves. Without the right strategy, large estates can face unexpected tax bills. Understanding the advantages and pitfalls of portability is essential for protecting generational wealth.
- Understanding Estate Tax Exemption Portability
Portability allows a surviving spouse to use any unused portion of their deceased spouse’s federal estate tax exemption. With the 2025 exemption set at $13.99 million per person, a married couple can shield up to $27.98 million from federal estate taxes. This can prevent millions from going to the IRS instead of heirs. But portability isn’t automatic. The executor must file IRS Form 706 within nine months of death (plus extensions) to make the election. Miss the deadline, and the unused exemption is lost forever.
Florida does recognize portability at the federal level, but the good news is that Florida has no state estate tax. This means that residents can fully take advantage of portability without worrying about additional state-level taxes. However, high net worth families with property or business interests in other states should still consider state tax exposure in their estate planning.
- Benefits of Electing Portability
- Doubles the Tax-Free Transfer – A couple can protect more assets from taxation.
- Simplifies Estate Planning – Reduces the need for complicated trust structures.
- Provides Financial Flexibility – The surviving spouse retains full control of inherited assets.
- No Immediate Action Needed – The first spouse can leave everything tax-free, and the exemption carries forward.
- Florida Has No Estate Tax – Unlike some states that impose their own estate taxes, Florida residents don’t have to worry about losing part of their exemption at the state level.
For estates approaching the taxable threshold, portability is an essential planning tool. Without it, heirs could face massive tax bills unnecessarily.
Also Read: 7 Insider Estate Planning Secrets of the Ultra Wealthy
- Potential Pitfalls and Limitations
Estate tax portability has limitations that can reduce its effectiveness:
- Strict Filing Requirements – The IRS doesn’t grant portability automatically. Form 706 must be filed, even if no estate tax is due.
- Uncertainty in Tax Law – The estate tax exemption could drop significantly in the future, reducing protection for large estates.
- Doesn’t Apply to Generation-Skipping Transfer Tax (GSTT) – Portability doesn’t extend to wealth passed to grandchildren. Additional planning is required.
- State Estate Taxes Elsewhere – While Florida has no estate tax, some states impose their own, starting at $1 million. If a surviving spouse relocates or has assets in a taxable state, there could be unexpected tax liabilities.
- Remarriage Risks – If a surviving spouse remarries and their new spouse dies first, they lose their first spouse’s exemption and only inherit the new spouse’s. This can reduce tax protection unexpectedly.
Timing and execution matter. A single mistake—like failing to file on time—can cost millions.
- Strategic Considerations in Utilizing Portability
Not every estate should rely on portability alone. Other planning tools can provide stronger tax advantages and asset protection.
- Trusts vs. Portability – While portability is simple, bypass trusts and credit shelter trusts offer better protection against creditors, remarriage complications, and future tax changes.
- Future Estate Growth – If an estate is expected to appreciate significantly, a credit shelter trust can preserve more wealth than portability alone.
- State Tax Risks for Out-of-State Assets – While Florida has no estate tax, trusts can help reduce exposure in states that do.
- Long-Term Wealth Transfer – Portability doesn’t cover generation-skipping transfers, making dynasty trusts a better option for multigenerational planning.
Portability is useful, but it isn’t always the best solution. A customized estate plan ensures maximum tax efficiency.
- The Role of Professional Guidance
Estate tax laws are complex, and the IRS isn’t forgiving when deadlines are missed. A professional ensures compliance and maximizes savings.
- Legal Expertise – Estate attorneys handle Form 706 filing, making sure the exemption is preserved.
- Customized Planning – Every family’s financial situation is different. The right mix of portability, trusts, and asset structuring minimizes tax burdens.
- Staying Ahead of Law Changes – Estate tax laws shift, and proactive planning keeps exemptions optimized.
Without proper guidance, estates can lose millions to unnecessary taxes. A solid plan ensures assets are protected and heirs receive their full inheritance.
Partnering with SJF Law Group for Your Estate Planning Needs
Portability can be a powerful tool, but it’s not foolproof. Failing to file on time, miscalculating state tax risks, or ignoring trust strategies can lead to costly mistakes. Florida residents benefit from having no state estate tax, but those with property or business interests elsewhere need to be especially cautious. At SJF Law Group, we create tailored estate plans that protect assets and minimize tax exposure. Whether securing portability, establishing and administering trusts, or optimizing wealth transfers, our attorneys ensure that families retain what they’ve built. Schedule a consultation today to safeguard your estate for future generations.