US-UK · Journal
US Estate Tax Portability and the DSUE Election for Cross-Border Couples
Portability is not automatic. Why cross-border families lose a deceased spouse's unused US estate tax exclusion, and the five-year window to put it right.
Portability is not automatic. Why cross-border families lose a deceased spouse's unused US estate tax exclusion, and the five-year window to put it right.
A deceased spouse's unused US estate tax exclusion — the deceased spousal unused exclusion amount, or DSUE — can pass to the surviving spouse, but only if the executor of the first estate files a Form 706 and elects it. The election is never automatic, and it is required even where no estate tax is due and the estate is nowhere near the filing threshold. That one requirement is why cross-border families, whose estates are often administered entirely outside the United States, lose exclusion more often than anyone else. We cover the Section 6013(g) election for a non-resident alien spouse explained separately.
Section 2010 gives every person an applicable exclusion amount made up of two parts: a basic exclusion amount, and — for a surviving spouse — a DSUE amount. IRC §2010(c)(3) currently sets the basic exclusion amount at $15,000,000, with indexation for deaths after 2026 measured from a 2025 base. The IRS's own filing threshold table gives $15,000,000 for a 2026 death and $13,990,000 for 2025.
The DSUE itself is the lesser of two figures under Reg. §20.2010-2(c)(1): the basic exclusion amount in effect in the year of the first spouse's death, and the excess of that spouse's applicable exclusion amount over their taxable estate plus adjusted taxable gifts.
Three features of that definition matter more than the headline number.
It is fixed in the year of the first death. A widow whose husband died in 2013 carries a DSUE measured against the 2013 exclusion, however long she survives him. Nothing makes it track the current figure.
It comes only from the last deceased spouse. Reg. §20.2010-3(a) makes a DSUE available only where that decedent is the survivor's last deceased spouse at the relevant date. Remarriage followed by a second bereavement replaces the first DSUE with whatever the second estate elected — possibly nothing.
The IRS can look back indefinitely at the first return. Under IRC §2010(c)(5)(B) the Secretary may examine the first spouse's return to determine the DSUE amount even after the ordinary section 6501 assessment period has closed. That return has to be right, not merely filed.
A Form 706 is due nine months after death, and the Form 706 instructions confirm an automatic six-month extension on Form 4768. The instructions also state plainly that the return must be filed by the executor of a US citizen's or resident's estate whose executor elects to transfer the DSUE amount to the surviving spouse, regardless of the size of the decedent's gross estate.
So an estate of $800,000 — well under any threshold, no tax to pay, nothing to disclose — must still lodge a complete federal estate tax return if the family wants to keep the first spouse's exclusion. Nothing in the UK probate process prompts it. No HMRC form asks about it. The grant is sealed, the estate is distributed, and the DSUE quietly lapses.
Two mitigations are worth knowing about. Reg. §20.2010-2(a)(7)(ii) relieves a portability-only estate of reporting values for property qualifying for the marital or charitable deduction: the executor describes the property and the beneficiary, exercises due diligence to estimate fair market value, and reports under penalties of perjury the range containing the best estimate of the gross estate. Carve-outs apply — including where only part of an interest qualifies, or a partial disclaimer or partial QTIP election is in play.
And the election happens by default: under Reg. §20.2010-2(a)(2) and (a)(3) a complete, properly prepared, timely return elects portability unless the executor affirmatively states otherwise on it, or fails to file on time.
Most families only discover portability after the deadline. Rev. Proc. 2022-32, effective 8 July 2022, replaced the earlier two-year window in Rev. Proc. 2017-34 with a five-year one, precisely because the IRS was receiving a flood of ruling requests from estates that had missed it.
The simplified method is available where the decedent was survived by a spouse, died after 31 December 2010, and was a citizen or resident of the United States on the date of death — and where the executor was not required to file under section 6018(a) on the gross estate and adjusted taxable gifts, disregarding the portability filing need, and did not file within the normal period.
To use it, a person permitted to make the election must file a complete and properly prepared Form 706 on or before the fifth annual anniversary of the date of death, with this statement at the top: "FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A)." No user fee applies, and satisfying those requirements is deemed to satisfy §301.9100-3, so the return is treated as timely for portability.
Two cautions sit inside the revenue procedure itself.
The relief is void if the estate turns out to have had a filing obligation. Section 4.03 says that if it is later determined the executor was required to file under section 6018(a), the extension is "null and void ab initio". An estate close to the threshold — easy to misjudge when assets are in sterling — cannot safely rely on this route.
The refund clock is separate and does not move. Section 5.01 makes clear that an extension granted here does not extend the IRC §6511(a) period for the surviving spouse or their estate to claim a credit or refund. The revenue procedure's own worked example shows a second estate having to lodge a protective claim on Form 843 in anticipation of the first estate's late Form 706, because otherwise the refund period expires before the DSUE arrives.
Once five years have passed, the simplified method is gone. Rev. Proc. 2022-32 is the exclusive procedure on or before the fifth anniversary for an estate within its scope; beyond that date the only route is a letter ruling request under §301.9100-3, with the user fee and delay that implies, and nothing guarantees it succeeds. For a family discovering the issue six years after a death in England, the realistic planning assumption is that the exclusion is gone.
The election belongs to the executor of the first spouse's estate — and this is where cross-border administration breaks down. An estate administered under an English grant of probate has personal representatives whose duties are defined by English law. Nothing in that role tells them to think about a US federal return, and often there is no appointed US executor at all.
US law anticipates this. Reg. §20.2010-2(a)(6) recognises both an appointed executor and, where there is none, a non-appointed executor, and the Form 706 instructions state that every person in actual or constructive possession of any of the decedent's property is considered an executor and must file a return. In practice this very often means the surviving spouse can file the Form 706 themselves as a non-appointed executor.
That is the single most useful thing a bereaved spouse abroad can learn early. The absence of a US grant, a US probate or a US-based executor does not prevent the election — it only means nobody will raise it unless the family does.
Where the surviving spouse is not a US citizen, IRC §2056(d)(1) disallows the marital deduction outright, with an exception under §2056(d)(2) for property passing to a qualified domestic trust under §2056A. Our guide to the QDOT and the non-citizen spouse covers how the trust itself is set up and taxed.
Portability and a QDOT are not alternatives — they work together, with a timing twist. The first estate computes the DSUE amount on the Form 706 in the usual way, but where property passes to a QDOT, Reg. §20.2010-2(c)(4) requires that amount to be redetermined when the final distribution or other event triggering the §2056A estate tax occurs — broadly, when all the QDOTs funded from the decedent's assets terminate, or when the surviving spouse dies. Correspondingly, Reg. §20.2010-3(c) sets the earliest date the DSUE may be included in the survivor's applicable exclusion amount as that same date. The practical effect is that the DSUE is banked but not yet spendable: a non-citizen widow with a QDOT generally cannot use it against lifetime gifts while the trust is running.
There is one exit. If the surviving spouse becomes a US citizen and the conditions in §2056A(b)(12) are met, the §2056A estate tax ceases to apply, the DSUE is no longer subject to adjustment, and under Reg. §20.2010-3(c)(2) it becomes available on the date of citizenship. Naturalisation therefore has an estate tax dimension that rarely features in the decision — and §2056(d)(4) separately preserves the ordinary marital deduction where the spouse becomes a citizen before the return is filed, having been a US resident continuously since the death.
Here the answer is blunt. Reg. §20.2010-2(a)(5) provides that the executor of the estate of a non-resident decedent who was not a US citizen at death may not elect portability, and filing such a return does not constitute the election. Rev. Proc. 2022-32 is consistent: its scope requires the decedent to have been a citizen or resident of the United States on the date of death.
So where a British spouse who was never a US person dies first, there is no DSUE to transfer to the American survivor, however modest the British estate was. Such estates are dealt with on Form 706-NA, where the IRS notes a filing threshold of just $60,000 of US-situated assets, a figure not indexed for inflation — a different problem, covered in our guide to US estate and gift tax for Americans in the UK.
One honest caveat: the regulation carries no treaty exception on its face, and we are not able to point you to a provision of the US-UK estate and gift tax convention that overrides it. If someone has suggested a treaty-based portability argument on your facts, that is a question for a specialist on the specific wording, not something to assume.
Before 2011, the standard American answer was a credit shelter or bypass trust: on the first death, an amount equal to the exclusion went into trust for the children rather than being wasted. Portability was meant to make that unnecessary, and for a domestic couple it largely does — the trade-off being that a bypass trust keeps future growth outside the survivor's estate, while portability gives a second step-up in basis but shelters no growth.
For a couple living in the UK the calculus changes, because the trust is a UK problem as well as a US solution.
A structure designed by a US attorney for a US couple can therefore import a decennial charge and forfeit a transferable nil rate band, while solving a US problem that portability would have solved for the cost of one Form 706. The reverse mistake also happens: relying on portability where the family wants generation-skipping capacity.
The generation-skipping transfer exemption is the big one. IRC §2631 allows every individual a GST exemption, allocable by that individual or their executor, and §2631(c) sets it equal to the basic exclusion amount under section 2010(c) for the year. Portability, by contrast, adds the DSUE to the survivor's applicable exclusion amount under §2010(c)(2). The two definitions do not meet, which is why an unused GST exemption simply dies with the first spouse — and why a bypass trust still earns its place where multi-generational planning matters. Allocations are also irrevocable once made, under §2631(b). Portability likewise does nothing about state-level estate or inheritance taxes, or about UK inheritance tax.
Estate administration is legal work, and the sequence below is a prompt for conversations with the right advisers, not a substitute for them.
1. Establish the status of both spouses at the date of death — citizenship, US residence, UK residence and long-term residence. This decides whether a DSUE can exist at all.
2. Diary the nine-month date immediately, and the six-month extension date on Form 4768.
3. Measure the gross estate in dollars at the date of death, with adjusted taxable gifts, to see whether section 6018(a) requires a return anyway. If it does, Rev. Proc. 2022-32 is unavailable.
4. Decide who will sign. With no appointed US executor, identify who is in actual or constructive possession of the decedent's property — frequently the surviving spouse.
5. File the Form 706 to elect portability even where no tax is due, using the reduced reporting rule if it applies.
6. Where the survivor is not a US citizen, settle the QDOT question before filing, since the marital deduction and the DSUE both turn on it.
7. Protect any refund position with a protective claim if the surviving spouse or their estate has already paid tax. The §6511(a) period does not wait for a late Form 706.
8. Claim the UK transferable nil rate band on the second death within the permitted period, and check whether a residence nil rate band claim is available too.
9. Review the wills and any trust deeds on both sides before anyone relies on a bypass trust. A US-drafted trust may behave very differently under UK inheritance tax.
10. Keep the first spouse's Form 706 and valuations permanently. The IRS can revisit the DSUE computation after the normal assessment period has closed.
Portability is a cheap fix available for a short time and an expensive loss afterwards. The families who lose it are almost never the ones who decided against it — they are the ones for whom nobody raised it while a US return could still be filed.
We prepare portability-only Form 706 filings alongside UK estate work, model whether portability or a trust gives the better answer across both systems, and set out where the five-year window stands on your facts. Every US filing is reviewed and signed by a licensed IRS Enrolled Agent who is also ACCA-qualified on the UK side, and we work with the family's solicitors rather than around them. Our US-UK tax specialists can review where a recent death leaves the exclusion — book a consultation if a nine-month or five-year date may be running.
General information on US estate tax portability, current at the date of publication. Not legal or tax advice. The answer depends on the individual estate, the terms of any will or trust, and the residence and citizenship of both spouses; estate administration is legal work, so take advice on your own circumstances before acting.