At Clark Allison LLP, we’re passionate about helping Californians navigate the complexities of estate planning with clarity and confidence. If you’re a surviving spouse in California, you may be wondering whether you should file a Form 706 to elect portability after your spouse’s passing. This decision can have a significant impact on your estate plan—and your family’s financial future. In this blog post, we’ll break down what portability means, the timelines involved, and what size estate might warrant filing a Form 706. Whether you’re in Sacramento, the Bay Area, LA, San Diego, or anywhere else in the Golden State, this guide is designed to help you make an informed choice as part of your California estate planning journey.
What Is Portability, and Why Does It Matter in California Estate Planning?
Portability is a federal estate tax provision that allows a surviving spouse to “inherit” their deceased spouse’s unused estate tax exemption, known as the Deceased Spousal Unused Exclusion (DSUE). Introduced under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, portability became a permanent fixture of federal law in 2013. For married couples, this can effectively double the amount of assets shielded from federal estate taxes when the surviving spouse passes away.
In 2025, the federal estate tax exemption is $13.99 million per person, meaning a married couple could potentially protect about $28 million combined if portability is elected. However, this exemption is set to drop significantly—by about half—after December 31, 2025, unless Congress extends the current law. While California does not impose a state estate tax, federal estate taxes can still apply to larger estates, making portability a critical tool for California estate planning.
To claim this benefit, the executor of the deceased spouse’s estate must file IRS Form 706, the United States Estate (and Generation-Skipping Transfer) Tax Return, and make the portability election. This step isn’t automatic, and missing it could cost your family millions in unnecessary taxes down the road. So, should you file? Let’s dive into the key factors.
Filing Form 706: Timelines You Need to Know
Timing is important when it comes to filing Form 706 for portability. Here’s what you need to understand about the deadlines:
Standard Deadline
Form 706 is due nine months after the date of your spouse’s death. For example, if your spouse passed away on March 14, 2025, the standard due date would be December 14, 2025. This applies whether the estate is large enough to owe federal estate taxes or not.
Extension Option
If you need more time, you can file Form 4768 to request an automatic six-month extension, pushing the deadline to 15 months after the death. Using the same example, this would extend the filing date to June 14, 2026. The catch? You must file Form 4768 before the initial nine-month deadline expires.
Simplified Method for Late Filings
What if you miss the 15-month window? Thanks to IRS Revenue Procedure 2022-32, there’s a lifeline. If the estate wasn’t required to file Form 706 (more on that below), you can still file it up to five years after your spouse’s death to elect portability—no expensive private letter ruling required. Just note “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER SECTION 2010(c)(5)(A)” at the top of the form. For a March 14, 2025, death, this gives you until March 14, 2030.
When Is Form 706 Required vs. Optional?
Before deciding whether to file, it’s important to distinguish between when Form 706 is required and when it’s optional for portability.
Required Filing
The IRS mandates filing Form 706 if the deceased spouse’s gross estate, plus adjusted taxable gifts made during their lifetime, exceeds the federal exemption amount at the time of death—$13.99 million in 2025. The “gross estate” includes assets like real estate, bank accounts, investments, life insurance proceeds owned by the decedent, and certain trust interests. If your spouse’s estate exceeds this threshold, filing the 706 is non-negotiable, and the portability election happens automatically unless you opt-out.
Optional Filing for Portability
If the estate is below the exemption amount, filing Form 706 isn’t required—but you must file it to elect portability. This is where strategic California estate planning comes into play. Even if no taxes are due now, electing portability preserves your spouse’s unused exemption for your family's future use.
What Size Estate Warrants Filing Form 706 for Portability?
So, what size estate makes filing Form 706 worthwhile? The answer depends on your current assets, future growth potential, and the looming exemption reduction. Let’s explore.
Estates Under $13.99 Million (2025 Exemption)
If your spouse’s estate is well below the current exemption—say, $3 million—filing might seem unnecessary. After all, no estate tax is due, and your own $13.99 million exemption might cover your assets when you pass. However, consider this: the exemption drops to around $7 million in 2026 (adjusted for inflation). If your combined estate could grow beyond that—through real estate appreciation in California’s hot markets, investment gains, or an unexpected windfall like an inheritance—portability could save your heirs significant taxes. For example, a $3 million estate today could balloon to $10 million over 20 years, leaving you exposed without your spouse’s DSUE.
Estates Between $5 Million and $10 Million
With an estate valued around $5 million to $10 million does not require filing a 706, it's a no brainer to do so. Filing Form 706 here is a proactive move to safeguard against future tax liability.
Estates Over $13.99 Million
For estates exceeding the exemption, filing is mandatory, and portability is a bonus.
Pros and Cons of Filing Form 706
Filing Form 706 isn’t free—it requires time, effort, and professional fees. Here’s a balanced look at the decision:
Pros:
1. Tax Savings
Portability could shield millions from federal estate taxes, especially if your estate grows or the exemption shrinks.
2. Flexibility
You don’t need complex bypass trusts to utilize both spouses’ exemptions, simplifying your California estate plan.
3. Future-Proofing
With the 2026 exemption drop on the horizon, locking in your spouse’s DSUE is a hedge against uncertainty.
Cons:
1. Cost and Complexity
Preparing the form can be burdensome and most people will hire an accountant to file the 706. In fact, we recommend using your accountant.
Do you need an appraisal for your real property? Technically no. But you need to provide a fair market value for the property. If the value of your estate requires you to file a 706, you need to get appraisals because the IRS will want evidence of your valuation. If your estate value doesn't require filing a 706, and you are only filing it for portability, the stakes are not as high, and a formal appraisal may not be needed.
NOTE: A separate issue from whether you need an appraisal to file the 706, is whether you need to establish the date of death value for step-up tax basis of the property. If the property is the deceased spouse's separate property or community property, the surviving spouse will get a step-up in tax basis for the property equal to the date of death value. An appraisal will establish the step-up value.
2. No Foreseeable Need
If your estate is small and unlikely to grow enough to approach the projected estate tax exemption amount, you probably don't need to file a 706.
California-Specific Considerations
Believe it or not, unlike many states, California does not have a state estate tax. It's true. California has a zero estate tax rate, beating out most states. But the bad news is you have to be dead to benefit from it.
But even though California has no state estate tax, federal rules still apply. Our state’s high property values mean estates can grow quickly, pushing you toward that post-2025 threshold. Plus, remarriage doesn’t erase portability from your first spouse (it’s based on the last deceased spouse), but it adds complexity if your new spouse dies first.
Our Recommendation
At Clark Allison LLP, we believe every surviving spouse in California should at least consider filing Form 706 for portability—especially if your combined estate exceeds $5 million or could grow significantly. The cost of filing pales compared to the potential tax savings, and the five-year window under Rev. Proc. 2022-32 gives you breathing room to decide. Even if your spouse’s estate is modest today, life is unpredictable—asset values rise, laws change, and portability is a safety net you can’t recreate later.
Ready to explore your options? Contact Clark Allison LLP today to schedule a consultation with our experienced California estate planning team. We’re here to guide you through your estate planning journey—because peace of mind is priceless.