I'm aware that the lifetime gift/estate tax exemption was $13.61 million in 2024. I wonder how that works for a couple?
For example suppose a couple owns $20 million all together. If one partner passed away earlier than the other, when they eventually pass that $20m to their children, do they get 2*13.61 million of exemption, or only $13.61 million?
You're asking about deceased spousal unused exclusion (DSUE). The surviving spouse can use the unused exclusion amount of the deceased spouse in addition to their own exclusion amount. Note that transfers between spouses are exempt entirely (assuming both spouses US citizens), so only gifts to others will eat into the deceased spouse's exemption. With non-resident/LPR spouses there may be some additional wrinkles. This is for the US Federal estate tax, states may have their own rules.
According to the IRS FAQ on estate tax:
In order to elect portability of the decedent's unused exclusion amount (deceased spousal unused exclusion (DSUE) amount) for the benefit of the surviving spouse, the estate's representative must file an estate tax return (Form 706) and the return must be filed timely. The due date of the estate tax return is nine months after the decedent's date of death, however, the estate's representative may request an extension of time to file the return for up to six months. An automatic six month extension of time to file the return is available to all estates, including those filing solely to elect portability, by filing Form 4768 on or before the due date of the estate tax return.
