Picture this: You and your spouse have worked for years to build a life—maybe a home you love, investments that grow, or even a business you’re proud of. In 2025, each spouse has an individual estate tax exemption of $13.99 million, meaning a couple can potentially shield $27.98 million from federal estate taxes. That’s a rare and powerful opportunity—but it’s not automatic; it depends on careful planning and timely actions.
Adding urgency, these generous exemptions are set to sunset on January 1, 2026, halving to an estimated $7 million per individual—around $14 million per couple—assuming no new legislation emerges.
Even for people who believe their estate is well-planned, this reduction could significantly alter outcomes—and create stress for their heirs. That’s why 2025 is a critical year to act. In my experience, the most successful estate plans for couples combine two powerful strategies: portability, which preserves a deceased spouse’s unused exclusion, and trust-based planning, such as credit-shelter (bypass) trusts, which protect asset appreciation and fine-tune the distribution of wealth. Each tool has its place—and together, they often deliver the best results.
In my practice, couples usually succeed when they understand the two most powerful planning options: portability, which allows a surviving spouse to carry over a deceased spouse’s unused exemption, and trust-based planning, such as a credit shelter or bypass trust, which can protect asset appreciation and provide for structured distribution. Each tool has its place—and a thoughtful blend often delivers the best outcome.
Portability: Simpler Planning, Significant Benefits
Portability became a permanent part of the federal tax code with the enactment of the American Taxpayer Relief Act of 2012. It allows a surviving spouse to claim the deceased spouse’s unused estate tax exemption, known as the Deceased Spousal Unused Exclusion (DSUE). This can substantially increase the amount the surviving spouse can shield from estate tax at their own death.
For example, if one spouse passes away in 2025, having used only $5 million of their $13.99 million exemption, the surviving spouse may be able to add the remaining $8.99 million to their own exemption, providing a total exclusion of nearly $23 million. To preserve this benefit, the executor of the deceased spouse's estate must file IRS Form 706 within nine months of death, though extensions are available.
Portability offers a straightforward solution for many families. It avoids the complexity and administrative costs of establishing and managing a trust. Additionally, the surviving spouse receives a full step-up in basis at their own death, potentially minimizing capital gains taxes for heirs.
However, portability has limits. The DSUE does not grow over time, meaning future appreciation of the deceased spouse's assets may be subject to estate tax. Also, remarriage can complicate the use of a prior spouse’s DSUE.
Why Trusts Still Have a Role
When portability became part of the tax code, many couples breathed a sigh of relief. After all, it seemed to simplify estate planning—no need for complicated structures if the surviving spouse could just inherit the unused exemption. But while portability is an excellent tool, it doesn’t erase the value of trusts. In fact, for many families, a trust remains the backbone of a strong estate plan.
Think of a credit shelter or bypass trust as a container that preserves the first spouse’s exemption and keeps the growth of those assets out of the surviving spouse’s estate. This isn’t just a technical tax play—it’s a way to make sure wealth you’ve worked for continues to support your children, grandchildren, or other beneficiaries without being whittled away by taxes at the second death.
Trusts also provide layers of protection that portability simply can’t. For example, if the surviving spouse remarries, assets in a trust are not exposed to the new spouse’s creditors or future divorce. If there are children from prior relationships, a trust ensures their inheritance is safeguarded, rather than relying on good intentions or uncertain future choices. I’ve seen situations where a lack of trust led to strained family relationships and outcomes that were never intended.
Another benefit is control and flexibility. Trusts enable you to establish clear instructions, such as deferring distributions until children reach a specific age or tying payouts to milestones, like completing school or purchasing a first home. You can even incorporate generation-skipping strategies to ensure that wealth passes efficiently to grandchildren, thereby minimizing the estate tax burden across multiple generations.
There’s also the state tax angle. While Georgia doesn’t impose a state estate tax, several states do—and they don’t all recognize federal portability. If you own property outside of Georgia, or if your heirs reside in a state with its own estate tax, a trust can provide a shield against state-level taxes that portability does not cover.
Of course, I’m the first to admit that trusts aren’t as simple as portability. They require legal drafting, funding, and ongoing administration. Someone—whether a family member or a professional trustee—must maintain records, make distributions, and adhere to the rules. But for many families, that complexity is outweighed by the peace of mind a trust offers. It’s about knowing your wishes will be carried out, your heirs are protected, and your legacy is secure, even as circumstances change.
Choosing the Right Strategy for Your Estate
One of the biggest misconceptions I hear from couples is that they need to choose either portability or a trust. In reality, it’s rarely an either-or decision. Many families benefit from using both tools in conjunction, depending on their estate size, family situation, and long-term objectives. Think of it like building a toolbox—portability may be the hammer, but a trust might be the wrench. Together, they make the plan stronger.
If your combined estate is comfortably under the federal exemption, portability can provide a straightforward way to protect assets without the administrative effort of a trust. But once estates begin to approach or exceed those limits, a trust can add important layers of protection. Unlike portability, which locks in a deceased spouse’s unused exemption without accounting for growth, a trust can shelter all appreciation that occurs after the first spouse’s death. That difference can mean millions of dollars in tax savings for families with appreciating real estate, closely held businesses, or investment portfolios.
Family dynamics are another key factor. In blended families, for example, a bypass trust allows the first spouse to ensure their share of the estate ultimately passes to their own children, while still providing for the surviving spouse during their lifetime. Portability alone can’t offer that level of control. Trusts can also shield assets from creditors, lawsuits, or even the complications of remarriage.
And don’t overlook state estate taxes. Not all states align with the federal rules, and some don’t recognize portability at all. If you own property in those states or your heirs live there, a trust may be the only reliable way to minimize state-level tax exposure.
The bottom line is that every family’s financial picture and values are unique. The right strategy is rarely a one-size-fits-all answer, but a tailored blend of portability and trusts that balances simplicity with protection.
How to Protect Your Legacy in 2025
- Act now. Lock in the high exemption before the 2026 reduction.
- File Form 706 for portability even if no tax is due; consider late election under Rev. Proc. 2022-32 if applicable.
- Review existing trusts and update distributions, funding, or trustee structures as needed.
- Coordinate your team: estate attorney, CPA, and financial advisor should align on strategy and execution.
- Revisit regularly as laws, asset values, and family situations change.
Conclusion
For married couples, preserving both spouses’ estate tax exemptions is a powerful way to transfer wealth and reduce future tax burdens. Portability offers simplicity and ease, while trusts provide control and protection. The best strategy may involve elements of both.
At Bascom Law, we specialize in guiding families through these decisions with care and clarity. Whether you’re building a plan for the first time or updating an existing one, we’re here to help you secure your legacy. To schedule a consultation, visit BascomLaw.com or call 770-285-5493.
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