Last Writes

When evaluating a future spouse, most people consider personality, interests, and whether they can agree on what to watch without scrolling for 45 minutes. Estate planning attorneys may add one more item to the list: Does this person have a DSUE?

A DSUE, pronounced D-S-U-E, is a deceased spousal unused exclusion amount. Every person has a federal estate and gift tax exemption—the amount they can transfer during life or at death without paying federal estate or gift tax. If a married person dies without using the full exemption, the unused portion may be transferred to the surviving spouse through a process called portability. The surviving spouse may then add that unused amount to their own exemption, potentially allowing the survivor to transfer more assets without federal estate or gift tax.

How Does a DSUE Work?

In 2026, an individual has a $15 million federal estate and gift tax exclusion. This means a person can generally transfer up to $15 million through taxable lifetime gifts and transfers at death before federal estate tax is imposed.

For example, assume a husband dies in 2026 after using only $3 million of his $15 million exclusion. His remaining $12 million may become his wife’s DSUE. If portability is properly elected, the wife could potentially have her own $15 million exclusion plus the $12 million DSUE—a combined federal estate and gift tax exclusion of $27 million.

DSUE can be valuable even when the surviving spouse’s estate is currently well below the federal threshold. Assets may appreciate, the spouse may inherit additional wealth, or tax laws may change. Filing for portability preserves flexibility at a time when no one can predict the surviving spouse’s future finances.

How is Portability Elected?

Portability is not automatic because the couple was married. The deceased spouse’s executor must generally file a timely and complete federal estate tax return, IRS Form 706, and elect portability for the surviving spouse. The ordinary filing deadline is nine months after the date of death. An estate may need to file IRS Form 706 solely to elect portability even though no federal estate tax is due and the estate is below the filing threshold. The executor must identify and report the decedent’s assets, determine date of death values, disclose certain lifetime gifts, and calculate the unused exclusion.

A Few Important Things to Keep in Mind

• A DSUE is not adjusted for inflation after the first spouse’s death
• Portability does not transfer the deceased spouse’s generation-skipping transfer tax exemption
• The surviving spouse generally may use only the DSUE of his or her last deceased spouse
• Remarriage alone does not necessarily eliminate an existing DSUE, but the death of a later spouse can change which DSUE is available

A portability return can look unnecessary when the first spouse dies, especially if the family’s wealth is well below the federal estate tax threshold, but declining to file closes a door that may become valuable later. Should DSUE come up on a first date? Might not be the best idea. Before marrying a widow or widower, though, it is worth determining whether an unused exclusion is part of the picture. After all, shared values and good conversation are important, but a little extra estate tax exemption never hurts.