The Estate Tax Mistake That Can Cost Families Millions

The U.S. tax code allows married couples to transfer more wealth to their heirs without paying estate taxes by using “portability.” This rule lets the unused portion of one spouse’s estate-tax exclusion be applied to the surviving spouse’s estate. To claim this benefit, the estate must follow strict filing rules. Mistakes can lead to large and unexpected tax bills.

This happened to the estate of Billy Rowland, a successful Ohio businessman who died in 2018 with $26 million in assets. His heirs planned to use $3.7 million of unused exclusion from his wife, Fay, who died in 2016. This would have saved the estate about $1.5 million in taxes. However, Fay’s estate-tax return did not include detailed values for certain assets, even though some of her heirs were people other than her husband or charities. The IRS said this made the return invalid, and the Tax Court agreed.

In 2024, the estate-tax threshold is $13.99 million per person and it will rise to $15 million in 2026. If filed correctly, portability can allow married couples to shield up to $30 million from the 40 percent estate tax. The Rowland case shows how a simple filing error can cause a family to lose this benefit entirely, even years after the first spouse’s death.

Estate-planning experts recommend that families file for portability when the first spouse dies, even if they are under the threshold now. Over time, investments can grow, inheritances can be received, or other financial changes can increase an estate’s value. The lesson is clear: file the portability return on time, follow all the rules, and avoid costly mistakes.

For more information see Ashlea Ebeling “The Estate Tax Mistake That Can Cost Families Millions,” The Wall Street Journal, August 9, 2025. 

Special thanks to Naomi Cahn (University of Virginia School of Law) for bringing this article to my attention.