A client dies this year and leaves everything to their surviving spouse who is a U.S. citizen. The executor files a timely estate tax return and elects portability. What amount of Deceased Spousal Unused Exclusion will the surviving spouse have the right to use?

A client dies this year and leaves everything to their surviving spouse who is a U.S. citizen. The executor files a timely estate tax return and elects portability. What amount of Deceased Spousal Unused Exclusion will the surviving spouse have the right to use?

• A. $0
• B. The Basic Exclusion Amount of the first spouse to die
• C. Up to the value of the first spouse to die's estate
• D. Unlimited

Answer: (B)

Portability lets the surviving spouse use the unused portion of the deceased spouse’s lifetime exclusion. The Basic Exclusion Amount is the amount that can pass tax-free for each person. When the first spouse dies, any portion of their BEA that wasn’t used becomes the Deceased Spousal Unused Exclusion (DSUE). If the first spouse leaves everything to the surviving spouse, the estate hasn’t used any BEA, so the DSUE equals the Basic Exclusion Amount of the first spouse to die. The surviving spouse can then apply this DSUE to their own estate, effectively increasing the amount that can pass tax-free. Therefore, the DSUE amount the surviving spouse can use is the Basic Exclusion Amount of the first spouse to die.

Portability lets the surviving spouse use the unused portion of the deceased spouse’s lifetime exclusion. The Basic Exclusion Amount is the amount that can pass tax-free for each person. When the first spouse dies, any portion of their BEA that wasn’t used becomes the Deceased Spousal Unused Exclusion (DSUE). If the first spouse leaves everything to the surviving spouse, the estate hasn’t used any BEA, so the DSUE equals the Basic Exclusion Amount of the first spouse to die. The surviving spouse can then apply this DSUE to their own estate, effectively increasing the amount that can pass tax-free. Therefore, the DSUE amount the surviving spouse can use is the Basic Exclusion Amount of the first spouse to die.