Wall Street Journal, The Estate Tax Mistake That Can Cost Families Millions:
One family ended up with an extra tax bill of $1.5 million, and now estate lawyers are on edge.
The U.S. tax code is generous when it comes to passing down money to heirs tax-free, and it has only become more so under the new tax law. But for married couples to obtain the full benefit, there is a strict set of rules. Messing up can be disastrous.
In the case of Billy Rowland, it cost his heirs $1.5 million in extra estate taxes [Estate of Rowland v. Commissioner, T,C. Memo. 2025-76]
Rowland expanded his many small businesses in Lorain, Ohio, over decades, with his hand in trucking, used cars, commercial real estate and banking. He served on local charity boards and wore a “World’s Greatest Grandpa” cap.
After he died, his executor filed an estate-tax return, and the Internal Revenue Service came calling in 2021, asking about the estate return of his late wife, Fay, filed years earlier. The tax agency said it believed her return was incomplete, and that disqualified his estate from getting a share of her exclusion.
The Rowland case has lawyers and accountants who prepare estate-tax returns on edge. The Tax Court sided with the IRS last month, disallowing the estate from using the common planning technique known as portability.
That lets a surviving spouse use any leftover exclusion amount from the first spouse to die—as long as the estate filed a return and filled it out properly. The trouble is, often no one checks the work until the second spouse dies. At that point, it can be too late to fix any mistakes.
The Tax Court said Rowland’s estate couldn’t take Fay’s unused exclusion amount of $3.7 million because of the error. Hence the extra taxes. The message to wealthy families is that obtaining the doubled estate tax shelter for married couples isn’t automatic.
The stakes for families are elevated by the permanent increase in the estate-tax exclusion amount under the new tax law. The estate-tax threshold is $13.99 million per person this year. It is $15 million per person for 2026 deaths, and indexed for inflation after that. Since estates are taxed at 40%, the heirs of a couple that loses the $15 million exclusion for the first spouse would owe an extra $6 million in taxes.
[N]nearly 500,000 Americans have a net worth of $15 million or more, according to the global wealth tracker Altrata. For those with estates worth $15 million to $30 million, it generally makes sense to file an estate-tax return when the first spouse dies to elect portability. “It would be a disaster if they fouled up,” said Ed Zollars, a Phoenix-based CPA.
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