Does Your Estate Qualify for the Deceased Spousal Unused Exclusion (DSUE)?

By Margaret Atkins Munro, Kathryn A. Murphy

As of January 1, 2011, one spouse can elect to transfer any unused exclusion amount to the surviving spouse. So, if your decedent doesn’t have a taxable estate but the surviving spouse has or may have a taxable estate, you’ll want to file a 706 for your decedent. The amount transferred to the surviving spouse is called the deceased spousal unused exclusion (DSUE).

As executor, you can elect transfer, or portability, of the unused exclusion to the decedent’s surviving spouse, but you must do so on a “completely and properly prepared” and timely filed estate tax return. The surviving spouse can later apply the DUSE amount received from his or her last deceased spouse against his or her own subsequent lifetime gifts and transfers at death.

The IRS recognizes that filing a 706 when you wouldn’t otherwise have to is a burden. So, in valuing the property for inclusion on a return which is being filed solely to elect the transfer of the DSUE, the executor may estimate the total value of the gross estate based on a determination made “in good faith” and with “due diligence” regarding the value of all the assets.