Specialized Returns for Individuals · Estate tax

Marital deduction and other marital issues (e.g., portability election)

Two provisions do the work in a married estate, and they operate very differently. The marital deduction is automatic in the sense that it applies to any qualifying interest without an election — but it is narrow in a way that surprises people, because the ordinary estate plan of a second marriage tends to create exactly the kind of interest it disallows. Portability is the opposite: broad and simple, but available only by an election, made by the executor of the first estate, on a return that estate was almost certainly not required to file.

The rule

The deduction. unlimited — the value of any interest in property passing from the decedent to the surviving spouse is deducted in full, but only to the extent that interest is included in determining the value of the gross estate (IRC § 2056(a))^TY2026Verified 2026-08-20IRC § 2056(a), read at law.cornell.edu/uscode/text/26/2056 Two limits are built into that sentence. Property not in the gross estate produces no deduction, and the deduction is measured by the value of the interest that actually passes to the spouse.

The terminable interest rule. no deduction for an interest that will terminate or fail on the lapse of time or on an event, where an interest in the same property passed from the decedent for less than adequate consideration to someone other than the spouse and that person may enjoy the property after the spouse's interest ends (IRC § 2056(b)(1))^TY2026Verified 2026-08-20IRC § 2056(b)(1), read at law.cornell.edu/uscode/text/26/2056 This is what disallows the classic second-marriage bequest: income to my wife for life, remainder to my children. Her interest terminates, the children take afterwards, and without more no deduction is allowed.

Two ways out. a life estate qualifies where the spouse is entitled for life to all the income, payable at least annually, with a power in the spouse alone to appoint the entire interest to the spouse or the spouse's estate, and no power in anyone else to appoint any part of it to anyone else (IRC § 2056(b)(5))^TY2026Verified 2026-08-20IRC § 2056(b)(5), read at law.cornell.edu/uscode/text/26/2056 And the one used in practice, because it lets the first decedent rather than the survivor decide who takes the remainder: qualified terminable interest property is treated as passing to the spouse — property passing from the decedent in which the spouse has a qualifying income interest for life and to which the executor's election applies, the spouse being entitled to all the income payable at least annually (IRC § 2056(b)(7))^TY2026Verified 2026-08-20IRC § 2056(b)(7), read at law.cornell.edu/uscode/text/26/2056

A non-citizen spouse gets neither, without a trust. IRC § 2040(b) does not apply where the surviving spouse is not a United States citizen, so the consideration-furnished test of § 2040(a) governs instead and the marital deduction is denied unless the property passes in a qualified domestic trust (IRC § 2056(d)(1))^TY2026Verified 2026-08-20IRC § 2056(d), read at law.cornell.edu/uscode/text/26/2056 The cure is a trust requiring at least one United States citizen or domestic corporation trustee, providing that no non-income distribution may be made unless that trustee can withhold the tax on it, meeting the Secretary's collection requirements, and covered by the executor's election (IRC § 2056A(a))^TY2026Verified 2026-08-20IRC § 2056A(a), read at law.cornell.edu/uscode/text/26/2056A

The gift tax has a parallel. an unlimited deduction in computing taxable gifts for the value of an interest transferred by gift to a donee who is the donor's spouse at the time of the gift, subject to a terminable interest rule of its own (IRC § 2523(a), (b))^TY2026Verified 2026-08-20IRC § 2523, read at law.cornell.edu/uscode/text/26/2523

Portability: what transfers. the lesser of the basic exclusion amount, or the applicable exclusion amount of the last deceased spouse reduced by the amount on which the tentative tax was determined under IRC § 2001(b)(1) on that spouse's estate (IRC § 2010(c)(4))^TY2026Verified 2026-08-20IRC § 2010(c)(4), read at law.cornell.edu/uscode/text/26/2010

Portability: how it is obtained. made by the executor of the estate of the deceased spouse, on an estate tax return for that estate on which the amount is computed, filed within the time prescribed including extensions — and once made it is irrevocable (IRC § 2010(c)(5)(A))^TY2026Verified 2026-08-20IRC § 2010(c)(5)(A), read at law.cornell.edu/uscode/text/26/2010 Note who makes it. Not the surviving spouse — the executor of the deceased spouse’s estate, on that estate’s return.

Two rules that cost money. only the last deceased spouse's unused exclusion is available — a survivor who remarries and outlives a second spouse loses any unused amount from the first, and amounts from successive spouses are not stacked (IRC § 2010(c)(4)(B)(i))^TY2026Verified 2026-08-20IRC § 2010(c)(4), read at law.cornell.edu/uscode/text/26/2010 And notwithstanding IRC § 6501, the Secretary may examine the deceased spouse's return to determine the unused exclusion amount after the ordinary assessment period for that estate has closed (IRC § 2010(c)(5)(B))^TY2026Verified 2026-08-20IRC § 2010(c)(5)(B), read at law.cornell.edu/uscode/text/26/2010

Current figures

How it works in practice

The deduction rarely needs thought; the plan does. An outright devise to a spouse qualifies without analysis. Everything else — a trust, a life estate, a right to occupy a house, an annuity for life — needs to be tested against § 2056(b)(1), and most such interests fail it unless they have been drafted into § 2056(b)(5) or elected into § 2056(b)(7).

The QTIP election is where the judgement sits. Electing puts the property into the marital deduction now and into the survivor’s gross estate later. Not electing keeps it in the first estate, where it uses the first spouse’s exclusion. With a large exclusion, a partial election is often the right answer — enough to bring the first estate to zero tax, no more — and the election is made property by property, in fractions.

Portability’s practical rule is simpler than the statute. File a return for the first estate, even though nothing requires it and no tax is due, unless you are confident the survivor will never need the exclusion. Filing costs a fee. Not filing costs the exclusion permanently, and the loss becomes visible only years later.

The election belongs to the first estate. An executor who is not the surviving spouse has no personal interest in making it, and may not think to. Where the survivor is a beneficiary but not the executor, this needs raising in writing.

The last-deceased-spouse rule punishes remarriage. A widow with a substantial deceased spousal unused exclusion amount who remarries keeps it until the second husband dies; at that moment her available amount is whatever the second estate elected, which may be nothing. It is not a reason not to remarry, but it is a reason to make the election on the second estate too.

Remember what portability does not carry. It carries unused basic exclusion. It does not carry the generation-skipping transfer exemption, which is not portable and is lost if unused.

How this has changed

Portability is the recent part. It arrived in 2010, was made permanent in 2013, and has been the single largest simplification in estate planning for ordinary married couples: the credit shelter trust that used to be mandatory simply to avoid wasting the first spouse’s exclusion is now often unnecessary. What has not changed is that it depends on a filing, and the failure rate on that filing is the profession’s standing problem with the provision.

Pub. L. 119-21 did not amend § 2056, § 2056A, § 2523 or the portability provisions in § 2010(c)(4) and (5). What it did was raise the basic exclusion amount to $15,000,000 for a decedent dying in calendar year 2026 — the IRC § 2010(c)(3)(A) basic exclusion amount as raised by Pub. L. 119-21 § 70106, indexed from calendar year 2026 and rounded to the nearest $10,000 under § 2010(c)(3)(B)^TY2026Verified 2026-08-19IRC § 2010(c)(3) read at law.cornell.edu/uscode/text/26/2010 and Rev. Proc. 2025-32 § 2.14 read at irs.gov/pub/irs-drop/rp-25-32.pdf and make it permanent, which changes the calculus twice over. Fewer couples need portability at all — and for those who do, the amount at stake in the missed election is now larger than it has ever been.

The marital deduction provisions themselves are old and stable. The unlimited deduction dates from 1981; before that it was capped at roughly half the estate. Qualified terminable interest property arrived in the same Act, and the qualified domestic trust regime for non-citizen spouses in 1988. None has been materially amended since.

Exam focus

Two things get tested. First, whether an interest qualifies: apply the three conditions of § 2056(b)(1) in order, then look for § 2056(b)(5) or an election under § 2056(b)(7).

Second, portability mechanics: who elects (the executor of the deceased spouse’s estate), on what (an estate tax return for that estate), by when (the time prescribed including extensions), and whose amount (the last deceased spouse’s). Expect a remarriage fact pattern, because the last-spouse rule is the part candidates do not expect.

Know that the deceased spousal unused exclusion amount is the lesser of the basic exclusion amount or the last deceased spouse’s applicable exclusion amount less the amount on which the tentative tax was determined for that estate — not simply “whatever was left over”.

Check yourself

1. A decedent leaves his wife the income from a trust for her life, with the remainder to his brother. No election is made. Is the interest deductible?

Answer: No. IRC § 2056(b)(1) denies the deduction where the spouse’s interest will terminate, an interest in the same property passed from the decedent to another person for less than adequate consideration, and that person may enjoy the property afterwards. All three are satisfied.

2. Who makes the portability election, and on what return?

Answer: The executor of the estate of the deceased spouse, on an estate tax return for that estate on which the deceased spousal unused exclusion amount is computed, filed within the time prescribed including extensions (IRC § 2010(c)(5)(A)). The election is irrevocable.

3. A surviving spouse received a deceased spousal unused exclusion amount from her first husband. She remarries; her second husband dies having used his entire applicable exclusion amount, and his executor makes no election. What is her deceased spousal unused exclusion amount?

Answer: Nil. IRC § 2010(c)(4)(B) measures it against the applicable exclusion amount of the last deceased spouse, and amounts from earlier spouses are neither preserved nor added.

4. A decedent’s estate is well below the filing threshold and all of it passes to his spouse. Is there any reason to file Form 706?

Answer: Yes — to make the portability election. It can only be made on a timely filed estate tax return for that estate, so an estate that files nothing loses the deceased spousal unused exclusion amount permanently.

5. A decedent leaves property outright to his surviving spouse, who is not a United States citizen. Is a marital deduction allowed?

Answer: No, unless the property passes in a qualified domestic trust meeting IRC § 2056A(a). Section 2056(d)(1)(A) disallows the deduction where the surviving spouse is not a citizen.