Specialized Returns for Individuals · Estate tax

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

Verification 2026 Verified
tax year · reviewed 2026-08-20 · Draft for I. Ohu review

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))^TY2026 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))^TY2026 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))^TY2026 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))^TY2026

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))^TY2026 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))^TY2026

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))^TY2026

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))^TY2026

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))^TY2026 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))^TY2026 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))^TY2026

Current figures

Item	Rule
Marital 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))^TY2026
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))^TY2026
Life estate with power of appointment	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))^TY2026
Qualified terminable interest property	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))^TY2026
Non-citizen surviving spouse	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))^TY2026
Qualified domestic trust	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))^TY2026
Gift tax marital deduction	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))^TY2026
Deceased spousal unused exclusion	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))^TY2026
Portability election	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))^TY2026
Last deceased spouse rule	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))^TY2026
Reopened examination	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))^TY2026
Basic exclusion amount	$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)^TY2026
Applicable exclusion amount	the basic exclusion amount plus, for a surviving spouse, the deceased spousal unused exclusion amount (IRC § 2010(c)(2))^TY2026
Return threshold	a return is required where the gross estate of a citizen or resident exceeds the basic exclusion amount in effect for the calendar year of death — $60,000 of United States situs property for a nonresident who is not a citizen (IRC § 6018(a))^TY2026
Return due date	9 months after the date of death (IRC § 6075(a))^TY2026

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.

The second marriage that lost the deduction

A man dies leaving his house in trust: his second wife may live in it for life, after which it passes to his children by his first marriage. The house is worth $700,000.

No marital deduction is allowed. Her interest terminates on her death, an interest in the same property passed from him to the children for no consideration, and by reason of that passing they may enjoy the property afterwards — the three conditions of § 2056(b)(1). The remedy is an election: if the trust gives her all the income annually and no one may appoint the property to anyone else during her life, the executor may elect under § 2056(b)(7) to treat the whole $700,000 as passing to her. It is then deductible now and in her gross estate at her death.

The return nobody had to file

A woman dies with a gross estate of $1,800,000, all of it to her husband. Her executor is told correctly that no return is required — the gross estate is far below the basic exclusion amount — and none is filed. Her husband dies nine years later with an estate of $19,000,000.

His applicable exclusion amount is his own basic exclusion amount and nothing more. Her entire unused exclusion is gone, because § 2010(c)(5)(A) permits the amount to be taken into account only if her executor filed a return computing it and made the election, within the time prescribed including extensions. The return that no rule required was the only way to preserve it, and the cost of the omission falls entirely on the second estate.

The exclusion that changed spouses

A widower’s late wife’s estate made a portability election, giving him a deceased spousal unused exclusion amount equal to her full basic exclusion amount. He remarries. His second wife dies two years later with a large estate that uses all of her own exclusion, and her executor makes no election.

His deceased spousal unused exclusion amount is now nil. Section 2010(c)(4)(B)(i) measures it against the applicable exclusion amount of the last such deceased spouse, and she used all of hers. The first wife’s amount is not preserved alongside it and the two are not added. He had the benefit for two years and lost it on an event he did not control.

The non-citizen spouse and the trust that fixed it

A man dies leaving everything outright to his wife, who is a lawful permanent resident but not a citizen. His estate is $21,000,000.

No marital deduction is allowed under § 2056(d)(1)(A), and § 2040(b) is switched off as well. The estate is taxable on the excess over his applicable exclusion amount, immediately. The available cure is a qualified domestic trust under § 2056A: at least one United States trustee, a withholding mechanism on non-income distributions, and the executor’s election. That defers the tax rather than removing it — the § 2056A(b) tax falls on distributions of principal and on the property remaining at her death — but it converts an immediate liability into a deferred one, and if she naturalises before the return is filed the ordinary deduction becomes available instead.

Assuming any bequest to a spouse is deductible. The terminable interest rule in § 2056(b)(1) disallows the ordinary life-estate-with-remainder bequest unless it is drafted into § 2056(b)(5) or elected into § 2056(b)(7).

Thinking portability is automatic. It requires an affirmative election by the executor of the first estate on a timely return, and once made it is irrevocable.

Thinking the surviving spouse makes the election. IRC § 2010(c)(5)(A) gives it to the executor of the deceased spouse’s estate.

Advising against a return because no tax is due. That is exactly the estate in which the election matters, and the only one in which it is likely to be missed.

Stacking unused exclusion from more than one spouse. Only the last deceased spouse’s amount counts (IRC § 2010(c)(4)(B)(i)).

Expecting the generation-skipping exemption to port. It does not. Only the basic exclusion amount is portable.

Assuming the first estate’s return is closed once § 6501 runs. IRC § 2010(c)(5)(B) lets the Secretary examine it to determine the unused exclusion amount long after assessment against that estate is time-barred.

Forgetting the marital deduction cannot exceed what is in the gross estate. Section 2056(a) allows it “only to the extent that such interest is included” — property that never entered the gross estate produces no deduction.

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)^TY2026 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.

Change log

2026-08-20Initial draft. Sets out the unlimited marital deduction in IRC § 2056(a) and the terminable interest limitation in § 2056(b)(1) with its exceptions for a life estate with power of appointment under § 2056(b)(5) and qualified terminable interest property under § 2056(b)(7), the denial for a non-citizen spouse under § 2056(d) and the qualified domestic trust in § 2056A(a), the gift tax counterpart in § 2523, and the portability election in § 2010(c)(4) and (5) including the last-deceased-spouse rule and the reopened examination power.