Do I have to file a US estate tax return to claim portability?
Yes — the election is made on a return for the estate of the first spouse to die, and there is no other way to make it. That is what catches families out. The estate may owe nothing, nobody sees a reason to file, and the survivor discovers years later that the unused exemption they were counting on was never carried over. The return has to be complete enough to support the amount being carried, which means the first estate's assets have to be identified and valued even where no tax is at stake. Treat the filing as the price of the election rather than as a tax computation.
Can my wife use my exemption if she is not a US citizen?
Two separate questions hide inside that one. The first is whether the exemption can be carried to her at all, which turns on the election made on your estate's return. The second is whether the transfer to her is shielded when you die, which depends on her citizenship rather than on the election — the spousal deduction couples assume is unlimited is not available in the same way to a surviving spouse who is not a citizen. A survivor who is not a US person may also have little use for a carried exemption, because their own estate is taxed only on what is treated as US situated. Both questions are worth settling while both spouses are alive.
We missed the portability election — can it still be made?
Sometimes, and the answer turns on dates and on whether the estate was required to file for any other reason. Where an estate had no filing obligation of its own and the only purpose of a return is the election, there is a relief route for making it late. Where a return was required and was simply filed without the election, the position is harder. Either way the first step is the same: establish whether a return was due on its own merits, then work out which route is open. Do not assume the door is shut because a deadline has passed, and do not assume it is open either.
Does portability help if the surviving spouse lives in Canada?
It depends on what the survivor will own that the United States can tax. A carried exemption is only worth having if there is a US estate tax exposure for it to be set against, so for a survivor who is a US citizen it usually matters wherever they live. For a survivor who is not a US person it may matter very little, because only their US situated assets are in scope and a different relief mechanism applies to those. The election still costs a filing, so the sensible order is to look at the survivor's own likely estate first and then decide.
Is portability automatic when the first spouse dies?
No. Nothing about it happens by default. The executor of the first estate has to file and elect, and the survivor then has to keep that return for the rest of their life, because it is the evidence of the amount available to their own estate decades later. In practice the record keeping fails more often than the election does. The return is filed, the family papers are dispersed, and the second estate cannot prove what was carried. Give the survivor a copy, keep one with the will, and note in the file how the amount was computed.
What does the survivor need to keep after the election is made?
The filed return for the first estate, the valuations that supported it, and a note of the computation. The election is only useful when the second estate can show what amount was carried and how it was arrived at, and that may be many years later, in another country, with a different adviser. Keep the schedules, not just the signature page. If any of the first estate's assets were valued on a basis that needed explaining — a private company, a property abroad, a jointly held account — keep the explanation with the return.
What is a double tax treaty and what does it actually do?
It is an agreement between two countries that divides up the right to tax. Article by article it decides which country taxes employment income, dividends, interest, royalties, pensions, property and business profits — and where both may tax, it caps what the source country can withhold and tells the other to give credit. It also breaks residence ties and opens a government-to-government channel for disputes. What it never does is apply itself: a treaty position is claimed. See our treaty work.
What counts as foreign income, and what is a foreign tax?
Foreign income is income sourced outside the country you are filing in — where the work was done, where the property sits, where the payer is resident, depending on the type. A foreign tax, for credit purposes, is a levy imposed by another country that functions as an income tax and that you were legally required to pay. Consumption taxes, property taxes and most social contributions are not, however real the cost. Sourcing is decided by rule, not by which bank received it. See the foreign tax credit.
