Can a surviving spouse use an unused state estate tax exemption?
Key takeaway
A surviving spouse can use an unused state estate tax exemption only when the state allows portability. Maryland permits a surviving spouse to use the unused portion of the first spouse's exemption in addition to the survivor's own exemption. New York does not allow spouses to transfer an unused exemption through portability. These rules are relevant to owners of businesses, real estate, and private investments because state portability can differ.
State rules differ
State estate tax portability varies. Practitioner experience describes portability as unavailable in many states, which can leave a need for planning for both spouses.
State portability concerns a state's own estate tax exemption.
Maryland permits portability
The Maryland description calls this portability.
A Maryland practitioner article states that a surviving spouse may use each spouse's unused exemption if a return is filed.
New York does not permit portability
The rule applies to the New York estate tax exemption.
New York practitioners say that planning and payment cannot be deferred until the surviving spouse's death when the deceased spouse's exclusion is unused. Practitioners describe this consequence alongside the state's rule against portability.
Federal and state portability are separate
Federal portability is separate from state portability. Practitioners state that the federal estate tax exemption is portable between spouses, while New York does not allow portability of its state exemption.
State-specific descriptions identify whether an unused exemption may transfer for that state's estate tax.
Thresholds and rates change. Check the state's own current figures.