The Return That Is Filed Only to Save a Number

The federal estate tax exclusion for someone dying in 2026 is 15,000,000 dollars. The scheduled halving that planners spent years preparing for did not happen; the budget law enacted in July 2025 raised the figure instead. At that level, almost no family owes estate tax, which is exactly why almost no family files an estate tax return when the first spouse dies.

That decision is usually fine and occasionally expensive. Since 2011 a surviving spouse has been able to add the first spouse's unused exclusion to their own, a provision called portability. The statute is blunt about how it is claimed: the unused amount may not be taken into account unless the executor files an estate tax return on which the amount is computed and makes the election on that return. There is no other way to get it. A family that files nothing has, without being told so, let the first exclusion expire.

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What the Election Actually Preserves

The amount preserved is the lesser of the basic exclusion amount or the first spouse's applicable exclusion minus the amount on which tax was computed on that estate. For a couple where the first to die owned little in their own name, which is the common case, the amount preserved is close to the whole 15,000,000 dollars.

Two limits shape it. The first is that a surviving spouse can use the unused exclusion of the last deceased spouse only, and not the sum of several. Remarriage does not change who that is, but the death of the new spouse does, and the replacement may bring nothing with it. The second is that the election is irrevocable once the filing deadline has passed.

The ordinary deadline is nine months after the date of death, with an automatic six-month extension available on request. Miss that and the statute says no election may be made.

The Mechanics of a Deadline That Is Really Three

Except that it is not quite that final, and the relief has quietly grown more generous.

An estate that was not otherwise required to file, meaning the gross estate plus adjusted taxable gifts fell below the filing threshold, can use a simplified method set out by the IRS in 2022. The window runs to the fifth annual anniversary of the date of death. Before that revenue procedure the window was the second anniversary, so the available period more than doubled. There is no user fee, and the only unusual step is a line of text across the top of the return: FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER SECTION 2010(c)(5)(A).

The conditions are narrow and worth checking against the facts. The decedent must have been survived by a spouse, died after 2010, and been a citizen or resident. The estate must not have had its own filing requirement. And the executor must not have filed a return within the ordinary time, because an estate that filed late but complete cannot use this route.

After the fifth anniversary the only remaining path is a private letter ruling, with a user fee the IRS sets each January. And one deadline never runs at all: the statute says that notwithstanding the ordinary limitations period, the IRS may examine the first spouse's return to determine the unused amount, whenever the survivor eventually uses it.

What the Filing Costs

This is the part that keeps estates from filing. A full estate tax return values everything. For an estate filing only to make this election, the rules relax: the executor may estimate the value of property passing to the surviving spouse or to charity, in good faith and with due diligence, and report it as falling within a range rather than at a figure. That removes the appraisals on the largest assets in most of these estates.

How many families use any of this is not knowable from published data. The IRS counted 28,495 filings in the Form 706 series in fiscal 2025, down from 31,516 the year before, while its statistics division counted 7,195 returns filed in 2024 for estates that exceeded the filing threshold. No agency publishes a figure for returns filed solely to elect portability.

Why It Is Still Worth Doing

An exclusion is not an asset anyone sees, which is why it is the only thing of value a family can lose by taking the reasonable step of not filing a tax return on which no tax is due. Three things decide it. Whether the surviving spouse's own estate could plausibly exceed the exclusion in twenty or thirty years, since the figure is indexed but portfolios compound faster. Whether the state has its own estate tax with its own rules, as Maryland does, where a timely state return is required and the federal five-year window has no counterpart. And whether anyone has actually looked, because the five-year window is open now for every first death since late 2021.

DISCLAIMER

The content in this email does not constitute an offer or solicitation to buy or sell any financial instrument. All commentary is general in nature and is not directed at any individual investor.

— John Stone