Estate taxes may not be top of mind for many business owners and married couples today. With the federal estate and gift tax exemption at a historic high — $15 million per individual in 2026 (effectively $30 million per married couple) — it is easy to assume estate planning is no longer urgent.

That assumption can be very expensive.

A recent U.S. Tax Court case, Estate of Rowland v. Commissioner, proves exactly how costly a simple filing mistake can be. The result? An additional $1.5 million in federal estate taxes — entirely avoidable.

Let’s break down what happened and what every married taxpayer should understand.

The Hidden Opportunity Most Couples Overlook: Portability

When one spouse passes away, any unused portion of their federal estate and gift tax exemption does not automatically transfer to the surviving spouse.

To preserve it, the executor must properly file IRS Form 706 and elect what’s known as portability.

Portability allows a surviving spouse to inherit the deceased spouse’s unused exemption amount. When done correctly, this can effectively double the tax-free amount that passes to heirs.

When done incorrectly - or not done at all - the unused exemption is permanently lost.

Why This Matters Even If You’re “Not That Wealthy”

Many couples assume their estate is far below the exemption threshold, so filing Form 706 isn’t necessary.

But consider how quickly things can change:

• A business sale

• Real estate appreciation

• An IPO or liquidity event

• Investment growth

• Future changes in tax law

The exemption is scheduled to adjust for inflation — and Congress can always reduce it in the future. What feels safe today may not be safe tomorrow.

Portability protects against uncertainty.

The $1.5 Million Mistake

In Estate of Rowland v. Commissioner, the estate attempted to use the deceased spouse’s unused exemption. However, the required Form 706 had not been properly and timely filed.

Because of that failure:

• The surviving spouse lost access to the unused exemption.

• The estate could not claim portability.

• The result was an additional $1.5 million federal estate tax liability.

This was not an aggressive tax strategy gone wrong.

It was a compliance failure.

And it was completely avoidable.

Important Filing Deadlines You Must Know

To elect portability:

• Form 706 must generally be filed within 9 months of death.

• A 6-month extension is available using IRS Form 4768.

• Even if no estate tax is owed, Form 706 can still be filed solely to preserve portability.

• In certain cases, simplified filing procedures apply.

No timely filing = no portability.

Why Business Owners Should Pay Close Attention

Business owners often experience rapid increases in net worth due to:

• Company growth

• Asset appreciation

• Buyouts

• Mergers and acquisitions

A surviving spouse could unexpectedly inherit a significantly larger estate than originally anticipated.

Without portability, that growth may be exposed to federal estate tax rates of up to 40%.

That is not wealth transfer planning - that is wealth erosion.

The Takeaway for Married Couples

Today’s high exemption amounts can create a false sense of security.

But estate planning is not about today’s net worth — it is about protecting tomorrow’s legacy.

If you are married:

• Ensure your executor understands portability.

• Confirm that Form 706 will be filed, even if no estate tax appears due.

• Work with competent tax and estate professionals.

• Review your estate plan regularly.

When it comes to preserving family wealth, proactive compliance is far less expensive than reactive correction.

Final Thought

The federal estate exemption is generous — but it is not automatic, permanent, or guaranteed.

One missed filing cost an estate $1.5 million.

The real question is not whether estate planning matters.

The real question is:

Will your family be prepared — or will they be the next case study?