For legally married couples, the portability provision allows for the transfer of the federal estate tax exemption from the estate of a spouse who passes away to the estate of the surviving spouse. Given that the maximum federal estate-tax exemption in 2019 is $11.4 million per person, by making use of the portability provision, the federal exemption upon the second spouse’s death can increase from $11.4 million to $22.8 million.
Portability was first introduced as part of the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 (“TRA 2010”), and became effective for married persons dying on or after January 1, 2011. While the winds of political change have led to calls for a reduction in the exemption over the years, there is no plan to phase out the portability provision any time soon.
In order to take advantage of the portability provision, IRS Form 706 should be filed within nine months of the first spouse’s death. However, it is possible for the surviving spouse to file Form 4768 and get a six-month extension. For families of means, the portability provision provides an excellent and relatively simple way to save millions of dollars in estate taxes.