Marriage-Based Tax Safety Net.
Portability & Portability Planning
Lock in a Second Estate-Tax Shield for Your Family—Even ff No Tax is Due Today—By Filing a Timely, Strategic Form 706.
Portability in NJ Trusts & Estates
What portability (DSUE) really is, why New Jersey couples should almost always file, and how to coordinate DSUE with Credit Shelter Trusts (CST), QTIPs, IRAs, and basis planning.
Portability sounds technical, but the promise is simple: when the first spouse dies, the family can “port” (transfer) the unused portion of that spouse’s federal estate tax exemption to the survivor. That amount—called DSUE, short for Deceased Spousal Unused Exclusion—becomes a second shield for your family at the survivor’s later death. You claim it by filing a federal estate tax return (Form 706) on time, even if no federal estate tax is owed.
In plain English: filing a 706 when the first spouse dies can save your family millions later. We make it easy, and we pair DSUE with protective trusts so you don’t trade protection for taxes.
Portability Explained
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The Concept: If Spouse A dies and didn’t need all of their federal exemption, the unused amount can be transferred to Spouse B. That transferred amount is DSUE.
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How You Get It: The executor files Form 706 by the deadline (generally 9 months after death, often extendable by 6 months) to elect portability. No filing = no DSUE.
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What It Buys You: More exemption for the survivor’s estate—potentially shielding assets and life insurance at Spouse B’s death.
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What It Doesn’t Do: Portability does not protect assets from creditors, remarriage risks, or poor decision-making, and it does not shelter post-death growth the way a Credit Shelter Trust (CST) can.
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Why NJ Families Care: Many New Jersey couples own appreciated real estate (shore homes, rentals) and growth portfolios. A 706 election keeps options open while we build protection through trusts.
The Building Blocks & Acronyms
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DSUE: Deceased Spousal Unused Exclusion—the amount of the first spouse’s unused federal exemption that transfers to the survivor when portability is elected.
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Form 706: Federal Estate (and Generation-Skipping Transfer) Tax Return—the form used to elect portability.
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CST (Credit Shelter Trust): Trust that uses the first spouse’s exemption now and keeps future growth outside the survivor’s estate.
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QTIP (Qualified Terminable Interest Property) Trust: Trust that defers estate tax to the survivor’s death, ensures spouse support, and preserves remainder beneficiaries.
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RLT (Revocable Living Trust): The core “will substitute” we fund during life to avoid probate.
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HEMS: Health, Education, Maintenance, and Support—a common, protective distribution standard.
Why “File Even if No Tax is Due” is Smart
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Insurance Against Law Changes: Exemptions can go down. A filed DSUE cushions the future.
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No Second Guessing: You only get one chance. Missing the 706 window risks losing DSUE entirely (limited late-relief may exist but is not guaranteed).
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Shore & Rental Appreciation: NJ real estate can climb quickly—DSUE buffers that later value.
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Simplicity For Heirs: A larger exemption at the survivor’s death streamlines post-mortem administration.
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Low Effort, High Upside: With our process, the compliance lift is modest relative to the potential savings.
How Portability Fits With Trusts (The Winning Combo)
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Portability + CST (Our Default): We capture DSUE and fund a CST. The CST shelters all future growth from the survivor’s estate and adds asset protection and remarriage guardrails. DSUE is “extra room” at the second death.
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Portability + QTIP: We may elect QTIP on some assets for spouse income and later basis step-up at the survivor’s death, while preserving DSUE with the 706.
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Disclaimer Flexibility: If values or needs are unclear, we can add Disclaimer Trust pathways; the survivor decides (within the legal window) what to push into CST/QTIP while the 706 secures portability.
Key Reminder: Portability does not apply to the GST exemption. If you want multi-generational protection, we must allocate GST at the first death (often to the CST or a GST-aware trust). Portability won’t do that for you.
NJ-Specific Realities
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Probate is For Creditors, Not Families: NJ probate is public and often drags 3–7% of the estate once you add executor commissions, legal/accounting fees, bond premiums, appraisals, and delays. We use RLT + funding so the 706 work syncs with a mostly non-probate administration.
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Inheritance Tax Classes: Spouses and lineals (Class A) are exempt; siblings, nieces/nephews, and non-relatives can trigger NJ inheritance tax on transfers. We coordinate bequests and beneficiary classes in tandem with portability.
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Deeds & Titles: We retitle NJ homes (often via Bargain & Sale Deed) into the RLT; at first death, we can fund CST/QTIP per the plan while the 706 locks in DSUE.
Common Mistakes We Prevent
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Skipping The 706 Because “No Tax Is Due.” That gamble can cost a family its DSUE.
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Relying On DSUE Instead Of A CST. DSUE doesn’t shelter appreciation and offers no creditor/remarriage protection.
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Missing Deadlines Or Poor Valuations. Late filings or sloppy appraisals undermine the election and future audits.
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SECURE Act Misalignment. Conduit-only retirement trust language can accelerate income tax. We often use an SRT (Stand-Alone Retirement Trust) with accumulation terms for protection and tax-rate management.
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Non-Citizen Spouse Oversights. When a surviving spouse is not a U.S. citizen, a QDOT (Qualified Domestic Trust) may be required for marital deduction; portability planning must be coordinated with QDOT and immigration/residency posture.
Our Process (Design → Draft → File → Maintain)
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Design & Discovery Meeting (DDM): Map people/assets, survivor cash flow, remarriage/creditor risks, and tax modeling.
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Drafting Suite: RLT, CST/QTIP architecture, pour-over Will, DPOA (Durable Power Of Attorney), AD (Advance Directive/Healthcare Proxy), HIPAA (Health Insurance Portability and Accountability Act) Authorization.
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Funding Plan: We retitle deeds, accounts, and beneficiaries; confirmations are kept in your secure vault. Trust funding is non-optional.
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At First Death: We value assets (appraisals as needed), choose CST/QTIP/disclaimer allocations, and prepare/file Form 706 to elect portability and (if appropriate) allocate GST.
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Ongoing Stewardship: AMP (Annual Maintenance Program)—annual review, funding and beneficiary audit, trustee refreshers. CCP (Continuing Counsel Plan)—quarterly “Family Office–Lite” cadence with CPA/RIA and trust officers, plus ILIT Crummey admin and SRT oversight.
Who Especially Benefits in New Jersey
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Homeowners With Appreciated Real Estate (Somerset, Morris, Monmouth, Bergen, shore towns).
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Second/Third Marriages where we want spouse support and child protection (CST/QTIP hybrid + DSUE).
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Growth-Focused Investors & Business Owners expecting appreciation between the first and second death.
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Families With Large IRAs/401(k)s needing SECURE Act–aware trust design and tax bracket management.
FAQs
Q: We’re “not that wealthy.” Should we still file a 706?
A: Yes. Exemptions can drop and assets can grow. DSUE is low-cost insurance with high upside.
Q: Does portability replace a Credit Shelter Trust?
A: No. DSUE doesn’t shelter growth and offers no creditor/remarriage protection. We typically combine DSUE with a CST.
Q: What’s the deadline?
A: Generally 9 months from date of death, often extendable 6 months with a timely extension. Don’t wait.
Q: Can we get DSUE if the surviving spouse remarries?
A: DSUE comes from the last deceased spouse. Remarriage can affect which DSUE applies—planning sequence matters.
Q: How do IRAs fit in?
A: We coordinate beneficiary designations and often use an SRT with accumulation provisions to handle the 10-year rule and protect beneficiaries.
Q: What if the surviving spouse isn’t a U.S. citizen?
A: A QDOT may be required for the marital deduction; portability planning must be coordinated with QDOT and immigration/residency considerations.
Book A Strategy Call
Book A Strategy Call to secure portability and design your CST/QTIP mix. We’ll prepare the 706, retitle assets, align beneficiaries, and maintain everything through AMP/CCP so your family is protected and taxes are minimized.