Portability of the Estate Tax Exemption Between Spouses: Is It Worth Electing

Married couples often assume that whatever one spouse does not use of their estate tax exemption will automatically carry over to the other. At the federal level, that assumption is correct, but only if the surviving spouse’s executor takes a specific, timely step. In New York, the same assumption is simply wrong. Understanding the difference between the two systems, and deciding whether the federal election is worth the paperwork, is something every married couple with meaningful assets should discuss with Bronx tax planning attorneys rather than leave to guesswork.

How Federal Portability Works

Each individual has a federal estate and gift tax exemption, which for 2026 stands at $15,000,000 per person. When a married person dies without using their full exemption, the unused portion, known as the Deceased Spousal Unused Exclusion, can be transferred to the surviving spouse. This is called portability, and it is not automatic. The deceased spouse’s executor must file a federal estate tax return, Form 706, and make the election, even if the estate is far too small to owe any tax on its own. Miss that filing and the unused exemption is generally lost for good.

Why It Is Not Automatic

Many families skip filing Form 706 because the estate is well under the filing threshold and no tax is due. That is understandable in the moment, but it can be an expensive oversight if the surviving spouse’s own assets grow, remarries into a larger estate, or receives an inheritance later in life. Because the portability election has to be made within a set window after death, this is not a decision to postpone until the surviving spouse’s own estate plan comes up for review.

Where New York Breaks From Federal Law

Here is the detail that catches many New York families off guard. New York has its own, separate estate tax, and for 2026 the state exemption is $7,350,000 per person, roughly half the federal figure. New York does not allow portability between spouses. Whatever exemption the first spouse to die does not use simply disappears at the state level, no matter what the executor files with the IRS. New York’s estate tax also has a so called cliff, under which an estate valued at more than 105 percent of the exemption loses the benefit of the exemption entirely and becomes taxable from the first dollar.

Is Electing Portability Worth It?

For most married couples, filing for federal portability costs little more than the time and expense of preparing a return, and it can meaningfully protect the surviving spouse if their financial picture changes later. But because it does nothing to help with the New York estate tax cliff, it should never be treated as a full estate tax strategy on its own. Couples whose combined estate approaches or exceeds New York’s exemption often still need tools such as credit shelter trusts to make full use of each spouse’s New York exemption.

Whether portability, a trust, or some combination makes sense depends on the full picture of a couple’s assets. The Bronx estate planning attorneys at Cavallo & Cavallo help families sort through both the federal and New York rules so nothing gets left on the table. Contact Cavallo & Cavallo to talk through how portability fits into your estate plan.

Sources:

irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-estate-taxes

nysenate.gov/legislation/laws/TAX/952