9120 / What issues involving the use of spouses’ estate tax exemption amounts can arise in a blended family? What is portability?
For some couples, portability makes it easier to make full use of both spouses’ estate tax exemptions even in the face of wealth disparity. Portability, which is the right of a surviving spouse to use any of a deceased spouse’s unused transfer tax exemption amount, allows the surviving spouse to increase his or her own estate and gift tax exemption amount in order to exclude more of his or her assets from transfer tax liability (essentially excluding $27.98 million from estate tax liability per couple in 2025; $27.22 million in 2024).1
In a first marriage, portability can be useful because the assets of the first-to-die spouse will typically pass directly to the surviving spouse (sheltered by the marital deduction), so that the first-to-die spouse will use none of his or her exemption. Portability ensures that the surviving spouse (whose eventual estate may be larger because he or she has inherited the assets of the first-to-die spouse) can make use of both spouses’ exemption amounts.
In the case of a subsequent marriage/blended family scenario, however, using portability may not be ideal because the spouses may wish to leave more property to children from previous marriages rather than leaving all assets to the surviving spouse. As a result, trust options may provide a more attractive strategy to allow spouses in a blended family to make full use of both spouses’ estate tax exemption amounts. See Q 9121 to Q 9123 for a discussion of some of the trust options that can be used by spouses in a blended family.
Planning Point: Clients should be aware that only the estate tax exemption of the most recent spouse can be used via portability.2 Therefore, if a client’s spouse predeceases him or her and the client chooses to remarry, the exemption amount of the first spouse will be lost if the subsequent spouse dies before the client. However, the client can continue to use his or her first spouse’s exemption for lifetime gifts made before the death of the subsequent spouse.
Portability is also discussed in Q 9108.
1. Rev. Proc. 2023-34. Portability was introduced in the Tax Relief, Unemployment Reauthorization and Job Creation Act of 2010, and was made permanent by the American Taxpayer Relief Act of 2012.