Key Takeaways:
- Federal estate tax rarely affects widows immediately thanks to the unlimited marital deduction.
- The 2025 estate tax exemption is $13.99 million. So, if your spouse’s estate is below this amount, it likely won’t owe federal estate tax.
- Portability can help you preserve your spouse’s unused exemption. Filing Form 706 within nine months of death is the only way to claim portability and increase your own exemption with the DSUE.
- Some states have lower exemption thresholds or inheritance taxes that could affect your estate, even if federal taxes do not.
- Non-citizen spouses need a QDOT to defer estate tax. Without a QDOT, assets left to a non-citizen surviving spouse may be subject to immediate taxation.
Losing a spouse is one of life’s most difficult experiences. Alongside the emotional toll, many surviving spouses also face the stress of handling estate and tax matters. One of the most common questions widows ask is: “Will I owe taxes on my spouse’s estate?” This article will walk you through key estate tax considerations for widows, including what you might owe, how to minimize your tax burden, and what steps to take to protect your financial future.
What Is Estate Tax, and Does It Apply to You?
Estate tax is a federal tax on the transfer of someone’s assets after they die. The IRS only applies this tax if the total value of the estate is above a certain threshold, called the estate tax exemption. For 2025, the federal exemption is about $13.99 million per person. So, if your late spouse’s estate is worth less than that, there likely won’t be any federal estate tax due.
This is different from inheritance tax, which is imposed on the person receiving the assets—not the estate itself—and is only charged in a few states. Most surviving spouses don’t have to pay inheritance tax, even in those states.
The Unlimited Marital Deduction
One of the most important estate tax rules for surviving spouses is the unlimited marital deduction. This means that all assets left to a surviving spouse pass tax-free, no matter the value. For example, if your spouse left you $15 million, you wouldn’t owe federal estate tax on that amount—even though it’s over the $13.99 million exemption—because it’s going to a spouse.
However, it’s crucial to understand that while the unlimited marital deduction defers estate taxes, it doesn’t eliminate them. When the surviving spouse passes away, the estate may be subject to tax if it’s large enough. That’s why proper planning is crucial, even if there’s no immediate tax due. It’s also crucial to understand that the unlimited marital deduction only applies if the surviving spouse is a U.S. citizen. If you are not a U.S. citizen, your spouse’s estate cannot use the marital deduction unless a special trust, known as a Qualified Domestic Trust (QDOT), is established. In that case, assets placed in the QDOT can qualify for the marital deduction, although distributions may still be subject to estate tax.
Portability and the Deceased Spousal Unused Exclusion (DSUE)
The IRS allows surviving spouses to inherit any unused portion of their spouse’s estate tax exemption through a rule called portability. The amount you can claim is called the Deceased Spousal Unused Exclusion (DSUE).
How Does Portability Work?
Imagine your spouse passes away and their estate is worth less than the exemption amount — say, $8 million. Since the exemption is $13.99 million, your spouse hasn’t used their entire exemption. They’ve only used $8 million, so there’s about $5.99 million left unused. Thanks to portability, you can add that unused $5.99 million to your own exemption when you eventually pass away. So instead of having just $13.99 million to pass tax-free, you’d have about $19.98 million.
Without portability, each spouse has their own separate exemption. In other words, unused exemption amounts would be lost when the first spouse dies. Portability preserves the unused exemption, allowing couples to effectively double their tax-free estate limit if planned correctly.
To take advantage of portability, your spouse’s estate executor must file IRS Form 706 within nine months of death (with a possible six-month extension). Even if the estate owes no tax, filing this form is critical. If it’s not filed, the unused exemption is lost, and you can’t use it later.
The Last Surviving Spouse Rule
Here’s something many people don’t know: you can only use the DSUE from your most recently deceased spouse. Let’s say your first spouse dies, and you elect portability to carry over their unused exemption. Later, you remarry, and your second spouse also passes. At that point, you can only use the DSUE from the second spouse—even if the first had a bigger unused amount. This is called the Last Surviving Spouse Rule, and it can have major implications if you remarry after being widowed. It’s a key reason to consider long-term estate planning, especially if you plan to remarry.
For instance, suppose Jane’s first husband, John, passed away, and she elected portability to use his unused exemption. If Jane later marries Mark and he also passes away, she can only use Mark’s DSUE, not John’s, even if Mark’s DSUE is less advantageous.
State Estate and Inheritance Taxes
While federal estate taxes may not apply to many estates, state-level estate or inheritance taxes can still impact widows. Several states impose their own estate taxes with exemption thresholds significantly lower than the federal level. For example, Oregon has estate tax exemptions of $1 million and tax rates ranging from 10% to 16%.
Some states (Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) also charge inheritance taxes, but most exempt surviving spouses. Inheritance taxes are different from estate taxes in that they are levied on the beneficiaries rather than the estate itself. For example, if you inherit $50,000 from a distant cousin in Pennsylvania, you may be subject to inheritance tax. But if your spouse dies and leaves you $1 million, you generally won’t owe any inheritance tax in any state.
Special Circumstances
Unfortunately, inheriting an estate can pose quite a few tricky scenarios. Here are just a few that are more common than you’d think.
Joint Owned Property
When a couple owns something together, like a house or bank account, it usually goes straight to the surviving spouse when one person dies, without going through the court process called probate. That makes things easier and faster. But for estate tax purposes, the IRS may count the full value of that shared asset in the estate of the person who died. That is unless the surviving spouse can show they helped pay for it.
Some things, like trusts, retirement accounts, or life insurance with named beneficiaries, also avoid probate and go directly to the person listed. However, they can still be taxed as part of the estate depending on how they’re set up. Using tools like trusts—especially special ones designed to protect the estate tax exemption—can help a family pay less in taxes when someone passes away.
You’re Not a U.S. Citizen
We mentioned that the unlimited marital deduction only applies if the surviving spouse is a U.S. citizen. If you’re not, you won’t be able to inherit tax-free in the same way. But a Qualified Domestic Trust (QDOT) helps fix that. A QDOT lets the surviving spouse receive income from the trust over time, instead of inheriting everything at once. This delays (or defers) the estate tax until either:
- The trust gives out the main money (the principal), or
- The surviving spouse passes away.
Say John (a U.S. citizen) dies and leaves $5 million to his wife, Sofia (a non-citizen). Without a QDOT, Sofia would have to pay estate taxes right away. But with a QDOT:
- The $5 million goes into the trust.
- Sofia gets regular income from the trust (like interest or dividends).
- No estate tax is due yet.
- If she later takes out a chunk of the principal, estate tax is due on that amount.
- When she eventually dies, estate tax is paid on whatever is left in the trust.
This approach allows the surviving spouse to benefit from the money while postponing estate taxes, which can help with financial stability.
What Should Widows Do Now?
If you’re recently widowed, there are some important steps to take:
- Start by figuring out the total value of your spouse’s estate. This includes everything—real estate, retirement accounts, bank accounts, business interests, and personal property.
- Talk to a qualified estate attorney and a tax advisor. Even if you think the estate is small, they can help you understand your options and avoid missing critical deadlines like Form 706.
- If portability applies, don’t skip Form 706. Filing this form is the only way to transfer your spouse’s unused exemption to you, even if no tax is due now.
- Review your own estate plan. Inheriting assets may significantly change your financial picture. It’s a good time to update your will, trusts, and beneficiary designations to reflect your new situation.
- Understand your state’s tax laws. Some states will surprise you with estate or inheritance taxes even if you’re not affected at the federal level.
Frequently Asked Questions
Q: Do widows have to pay estate tax on their spouse’s estate?
A: Most widows will not owe federal estate tax due to the unlimited marital deduction, which allows assets to pass to a surviving spouse tax-free. However, larger estates may owe tax when the surviving spouse passes away.
Q: What is the estate tax exemption for 2025?
A: The federal estate tax exemption for 2025 is approximately $13.99 million per person. If your spouse’s estate is below this amount, no federal estate tax is due.
Q: What is the unlimited marital deduction?
A: The unlimited marital deduction allows all assets left to a surviving U.S. citizen spouse to transfer without triggering federal estate tax, regardless of value.
Q: How does portability work for estate tax?
A: Portability lets a surviving spouse claim any unused portion of their deceased spouse’s estate tax exemption. To do this, the estate must file IRS Form 706 within nine months of the spouse’s death.
Q: Is Form 706 required even if no tax is due?
A: Yes. Filing Form 706 is required to elect portability and preserve your spouse’s unused exemption, even if no estate tax is owed at the time.
Tax Help for Widows
Estate tax rules can be complicated, but they don’t have to catch you off guard. Widows have several protections under the law, including the unlimited marital deduction and the portability of unused exemptions. Still, these benefits aren’t automatic—you need to take action to claim them. Filing paperwork on time, reviewing your assets, and working with professionals can help you avoid unnecessary taxes and ensure your loved ones are protected in the future. Optima Tax Relief is the nation’s leading tax resolution firm with over $3 billion in resolved tax liabilities.
If You Need Tax Help, Contact Us Today for a Free Consultation