Deceased spousal unused exclusion (DSUE)
Key takeaway
The deceased spousal unused exclusion (DSUE) is the unused exclusion from a surviving spouse’s last deceased spouse, capped by the basic exclusion amount at that spouse’s death and available to the survivor through a valid portability election.
How it works
- How is the DSUE amount calculated?
DSUE is the lesser of the basic exclusion amount at the deceased spouse’s death or that decedent’s applicable exclusion amount minus Form 706, Part II, line 5, calculated on the deceased spouse’s estate tax return. The underlying tentative tax base includes the taxable estate and adjusted taxable gifts, with amounts on which gift taxes were paid excluded from adjusted taxable gifts for this computation.
- Does DSUE apply before the survivor’s own basic exclusion?
Yes. Available DSUE from the last deceased spouse applies first to a taxable gift made after that spouse’s death when portability is effective, subject to the last deceased spouse rules and the survivor eligibility and qualified domestic trust limits below. DSUE cannot shelter a transfer made before that spouse’s death.
The filing election
- Does a small estate need to file Form 706 to elect portability?
Yes. Under the ordinary filing procedure, electing portability requires a complete, timely Form 706 with DSUE when there is a surviving spouse, regardless of estate size. Filing is deemed an election unless the executor opts out in Part VI, Section A. An estate not required to file under section 6018(a) can avoid making an election by not filing. A portability election is irrevocable unless an adjustment or amendment appears on a subsequent return filed on or before the due date.
The ordinary portability filing deadline is nine months after death, or before the six month extension period ends if a filing extension has been received. Form 4768 is used to apply for an automatic six month extension of time to file.
Only the appointed, qualified executor acting in the United States on behalf of the estate may make or opt out of the portability election when such an executor exists.
For filing after the ordinary deadline, see the late portability election guide.
Who counts as the last deceased spouse?
- Does remarriage alone change the last deceased spouse?
No. Remarriage alone does not change the last deceased spouse’s identity or prevent use of that spouse’s available DSUE. The last deceased spouse is the most recently deceased person married to the survivor when that person died, determined on the taxable gift date or, for a transfer at death, on the survivor’s death. The identity does not depend on whether that spouse’s estate elected portability or had any DSUE available. A later spouse’s death can change that identity even without replacement DSUE.
- Can unused DSUE from an earlier spouse be used after a later spouse dies?
No. Unused DSUE from an earlier spouse cannot shelter taxable transfers after a subsequent spouse’s death. With portability elected for the relevant spouses, DSUE from different deceased spouses may be used in succession. Earlier spouse DSUE used before a subsequent spouse’s death remains included in the survivor’s estate tax DSUE calculation.
For more on portability, see the portability and surviving spouse exclusion guide.
Whose citizenship and residence matter?
An estate cannot elect portability if the deceased spouse was both a nonresident and not a U.S. citizen at death. Both conditions concern the deceased spouse’s status at death.
A surviving spouse who is both a nonresident and not a U.S. citizen generally cannot use DSUE, except to the extent allowed by a treaty with the survivor’s country of citizenship.
For a qualified domestic trust, DSUE generally cannot shelter lifetime gifts until finally determined, usually at the survivor’s death or the trust’s termination. If the survivor becomes a U.S. citizen and section 2056A tax no longer applies to the trust’s assets, DSUE becomes final and available as of citizenship. See how a qualified domestic trust affects DSUE below.
Common questions
Can the IRS revisit DSUE after the deceased spouse’s assessment period expires?
Yes. When a survivor applies DSUE to a lifetime gift or bequest at death, the IRS may examine the return of a predeceased spouse whose executor elected portability to determine the allowable DSUE, even after that return’s assessment limitations period expires. The examination may adjust or eliminate DSUE.
Additional tax assessed on the deceased spouse’s return remains subject to that return’s applicable assessment limitations period.
How does a qualified domestic trust affect DSUE?
A qualified domestic trust, or QDOT, makes DSUE preliminary when the trust is established and a DSUE amount exists. The executor determines a preliminary DSUE amount for the portability election, and that amount decreases as section 2056A distributions are made.
DSUE generally cannot shelter lifetime gifts until finally determined, usually at the survivor’s death or the QDOT’s termination. If the survivor becomes a U.S. citizen and section 2056A tax no longer applies to the QDOT’s assets, DSUE becomes final and available as of the date the surviving spouse becomes a U.S. citizen.