I’m going to share with you a real story.
Last year, a wealthy widow - let’s call her Ms. Rumi - came to me with a common tax question.
“What can I do to minimize my taxes?”
Ms. Rumi, now in her 70s, had built an impressive $100 million real estate portfolio with her late husband, Mr. Saja. Tragedy struck in 2018 when Mr. Saja suddenly passed away.
By the time I met her in 2024 - six years later - she was frail, anxious and focused on protecting her children’s future. Her question had shifted:
“What can I do to minimize my estate taxes?”
Within two minutes of listening, I realized the painful truth: she had already lost $4.4 million - not by doing something wrong, but by failing to act.
How Estate Tax Works
When someone passes away, the IRS requires us to total up the value of everything we own. The total is called the gross estate.
Now, let’s assume Ms. Rumi dies owning her $100 million real estate portfolio.
Under today’s law, she gets about a $14 million exemption - technically called the Unified Credit. Everything above that - $86 million - is exposed to estate tax at 40%. That’s a staggering $34.4 million estate tax bill.
And who pays it? Not Ms. Rumi - she’s gone. Her estate pays, which means less wealth passes down to her children.
The Married Couple Advantage
Here’s the good news for married couples: each spouse gets a $14m exemption (in 2025).
Now, what happens when one spouse dies? That is where the real advantage kicks in. If the deceased spouse didn’t use up all of his/her exemption, the unused portion can be transferred to the surviving spouse.
That transfer is called DSUE portability (Deceased Spousal Unused Exclusion).
If the election is made, the surviving spouse can double the exemption - from $14m to $28m.
The Catch: Where Ms. Rumi Screwed Up
Here’s where things went wrong for Ms. Rumi.
The DSUE election comes with strict rules:
It must be made by the executor of the deceased spouse’s estate (often the surviving spouse).
It must be made on time. Under Rev. Proc. 2022-32, that means within 5 years of death.
By the time I met her, six years had already passed. Too late. The DSUE portability window had closed, and the chance to double her exemption was gone.
Here’s what that meant in real dollars
When Mr. Saja died in 2018, the exemption was $11m. Had Ms. Rumi filed the election, she could have added his $11m to her own $14m. That’s a combined $25m shield.
Without the election: $100m - $14m = $86m taxable estate → $34.4m tax bill
With then election: $100m - $25m = $75m taxable estate → $30m tax bill
That’s a $4.4m difference. Gone forever.
All because of one missed piece of paperwork - and lack of guidance.
The Lesson
Don’t forget the DSUE election! It’s one of the simplest yet most valuable estate tax moved out there.
If you and your spouse have built significant wealth and your spouse passes away, file the DSUE election.
It’s just paperwork, but the savings can be enormous - millions of dollars kept in your family’s hands instead of the IRS’s.
You won’t know the difference when you’re gone. But your kids will thank you.