DSUE Estate Tax: Election, Calculation, and Anti-Clawback Rules

When one spouse dies, the survivor can inherit whatever portion of the deceased spouse’s federal estate and gift tax exclusion went unused, but only if the executor files a federal estate tax return and formally makes the election. This inherited amount is called the Deceased Spousal Unused Exclusion, or DSUE, and claiming it through DSUE portability for surviving spouses is what lets a married couple combine their exclusions and shield up to $30,000,000 from federal transfer taxes in 2026. Portability is never automatic. Skip the election and the benefit is gone.

Making the Portability Election

The executor of the deceased spouse’s estate elects portability by filing IRS Form 706, the federal estate tax return, and completing Part VI. Filing the return on time is the election; there is no separate form or checkbox.¹ This filing is required even when the estate is well below the exclusion amount and would otherwise owe nothing and file nothing. The IRS instructions say the requirement applies to any estate electing portability “regardless of the size of the estate.”²

The deadline is nine months after the date of death. An automatic six-month extension to fifteen months is available by filing Form 4768 before the nine-month window closes. Once made, the election is irrevocable, with one narrow exception: an adjustment or amendment filed on or before the extended due date.²

If You Missed the Deadline

Estates that were not required to file Form 706 have a second chance. Revenue Procedure 2022-32 lets an executor make a late portability election up to five years after the date of death. To qualify, the decedent must have been a U.S. citizen or resident survived by a spouse, and no estate tax return can have been previously filed. The executor files a complete Form 706 with a notation at the top stating it is filed pursuant to Rev. Proc. 2022-32.³

How the DSUE Amount Is Calculated

The DSUE is computed on the deceased spouse’s Form 706. Start with the deceased spouse’s applicable exclusion for their year of death, subtract whatever the deceased spouse used through lifetime taxable gifts and the taxable estate, and the remainder is the DSUE. Under 26 U.S.C. § 2010(c)(4), the DSUE cannot exceed the basic exclusion amount.⁴

A concrete example. A spouse dies in 2026 when the basic exclusion is $15,000,000. During life they made $3,000,000 in taxable gifts and left a $2,000,000 taxable estate. That used $5,000,000 of exclusion, so the DSUE is $10,000,000.⁵

One feature trips people up. The DSUE is fixed at the date of death and never adjusts for inflation. The surviving spouse’s own basic exclusion continues to rise each year with inflation indexing; the DSUE does not. A spouse who died in 2020 with $5,000,000 unused leaves the survivor exactly $5,000,000 in DSUE today.

How the Surviving Spouse Uses the DSUE

The DSUE gives the survivor a second pool of exclusion to absorb federal gift and estate tax, and the IRS dictates the ordering. For lifetime gifts, the DSUE is applied first, before the survivor’s own basic exclusion amount. The regulation states that a surviving spouse making a taxable gift “will be considered to apply such DSUE amount to the taxable gift before the surviving spouse’s own basic exclusion amount.”⁶

This ordering works in the survivor’s favor. Because the DSUE is frozen and the basic exclusion keeps climbing with inflation, spending the static amount first preserves the growing one for later.

To apply the DSUE against lifetime gifts, the surviving spouse files Form 709, the federal gift tax return, and completes Schedule C. The first four pages of the deceased spouse’s Form 706 must be attached, along with any related DSUE calculations.⁷ Any DSUE that remains at the surviving spouse’s death is applied on the survivor’s own Form 706. The total exclusion available at that point equals the survivor’s personal basic exclusion amount plus whatever DSUE has not yet been consumed.

What Happens If the Surviving Spouse Remarries

The DSUE comes only from the “last deceased spouse,” meaning the most recently deceased person the survivor was married to at the time of that person’s death.² Remarriage by itself changes nothing. A survivor who remarries keeps the first spouse’s DSUE and can keep applying it to gifts while the new spouse is alive.

The designation shifts when the new spouse dies. At that point, the DSUE resets to whatever the second deceased spouse’s estate elected to transfer, and the first DSUE vanishes.² A survivor with multiple deceased spouses can use each one’s DSUE in succession but cannot stack them. To benefit from a first spouse’s DSUE before it is replaced, the survivor would need to make gifts large enough to use it up while that spouse still qualifies as the last deceased spouse.

Anti-Clawback Protection for Large Gifts

A reasonable worry for anyone using DSUE on large lifetime gifts is what happens if Congress later drops the exclusion. Treasury addressed this. Under 26 CFR § 20.2010-1(c), when the credit used against lifetime gifts exceeds the credit available at death under a lower exclusion, the estate tax calculation uses the higher gift-time credit rather than clawing it back. The regulation confirms that DSUE applied to lifetime gifts is “deemed to be applied to gifts made by the decedent before the decedent’s basic exclusion amount,” and that credit is preserved.⁸

What Portability Does Not Cover

The GST Exemption

The generation-skipping transfer tax exemption is not portable. Each spouse has their own GST exemption equal to the basic exclusion amount ($15,000,000 for 2026), and if a spouse dies without allocating it, it is lost.⁵ For families whose plans include gifts or trusts benefiting grandchildren, both spouses need to allocate GST exemption independently. Portability will not fill the gap.

Non-Citizen Surviving Spouses

Portability is generally unavailable to a surviving spouse who is not a U.S. citizen. The regulations provide that a noncitizen surviving spouse “shall not take into account the DSUE amount of any deceased spouse” except to the extent an applicable tax treaty allows it. Property passing to a noncitizen spouse typically flows through a Qualified Domestic Trust to preserve the marital deduction, and the DSUE remains subject to recalculation as principal is distributed. If the surviving spouse later becomes a U.S. citizen and meets the requirements of Section 2056A(b)(12), the DSUE becomes fully available, provided the deceased spouse’s executor made the portability election in the first place.⁹

State Estate Taxes

The DSUE is purely federal. No state automatically recognizes it, and most states with their own estate tax do not allow spousal portability at all. State exemption thresholds typically fall between roughly $2,000,000 and $7,350,000, far below the federal $15,000,000. A surviving spouse whose federal liability is fully wiped out by portability can still face a substantial state estate tax bill.

Where Things Stand for 2026

The Tax Cuts and Jobs Act doubled the basic exclusion starting in 2018, and that increase was scheduled to sunset at the end of 2025. The One Big Beautiful Bill Act, signed on July 4, 2025, eliminated the sunset and permanently set the basic exclusion at $15,000,000 for 2026, indexed for inflation in later years.¹⁰ For surviving spouses, that permanence removes the risk that an inherited DSUE will be measured against a suddenly halved exclusion. The frozen nature of the DSUE, the last-deceased-spouse rule, the GST gap, and the non-citizen and state-tax limits all remain in force.

1
Internal Revenue Service. Form 706 (Rev. August 2025)
2
Internal Revenue Service. Instructions for Form 706 (09/2025)
3
Internal Revenue Service. Revenue Procedure 2022-32
4
Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax
5
Internal Revenue Service. What’s New – Estate and Gift Tax
6
eCFR. 26 CFR 25.2505-2 – Gifts Made by a Surviving Spouse Having a DSUE Amount
7
Internal Revenue Service. 2025 Instructions for Form 709
8
eCFR. 26 CFR 20.2010-1 – Unified Credit Against Estate Tax; In General
9
Federal Register. Portability of a Deceased Spousal Unused Exclusion Amount
10
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One Big Beautiful Bill