When Billy Rowland passed away in 2018, his family discovered a devastating truth: a filing error on his late wife's estate tax return would cost them an extra $1.5 million in estate taxes. The recent Tax Court decision in Estate of Rowland v. Commissioner (T.C. Memo 2025-76, decided July 2025) serves as a stark warning to wealthy families in Atlanta and across Georgia about the critical importance of properly preserving a deceased spouse's unused estate tax exclusion through "portability."
This case has sent shockwaves through the estate planning community, with attorneys and accountants who prepare estate tax returns now on high alert. The implications extend far beyond one family's misfortune—they touch every married couple with significant assets who might one day rely on portability to minimize their estate tax burden.
The Costly Mistake That Changed Everything
Billy and Fay Rowland were married for 41 years, building a successful life together in Lorain, Ohio, through various small businesses including trucking, used cars, commercial real estate, and banking. Billy was known in his community not just as a successful entrepreneur but as someone who served on local charity boards and proudly wore his "World's Greatest Grandpa" cap. Their story is one that resonates with many successful business owners here in Atlanta—decades of hard work, smart investments, and careful planning to build wealth for future generations.
When Fay died on April 8, 2016, her estate filed what they believed was a proper estate tax return to preserve her unused estate tax exclusion for Billy's benefit. At that time, the estate tax exclusion was $5.45 million per person, and Fay's estate was valued at approximately $3 million. Her estate tax return was filed on December 29, 2017—after the standard deadline but within the extended timeframe allowed under Revenue Procedure 2017-34 for portability-only returns.
Two years later, when Billy died on January 24, 2018, with a $26 million estate, his executor claimed Fay's unused exclusion of $3.7 million—what's known as the Deceased Spousal Unused Exclusion (DSUE) amount. Everything seemed to be in order, and the family likely breathed a sigh of relief knowing they had preserved millions in tax savings through proper planning.
But in 2021, three years after Billy's death and five years after Fay's passing, the IRS came calling. The agency pulled Billy's estate tax return for audit and, in the process, examined Fay's return from years earlier. What they found would prove catastrophic for the family's finances. The IRS determined that Fay's estate tax return was incomplete, specifically because it failed to include individual valuations for each asset in her estate. Instead, the return had used estimated values—a seemingly minor detail that would prove to be a multi-million dollar mistake.
The Tax Court agreed with the IRS in July 2025, disallowing the estate from using the common planning technique of portability. The court's decision left the family with an additional $1.5 million tax bill—money that could have stayed in the family had the initial return been properly prepared.
Understanding Portability: A Powerful Tool for Married Couples
What Is Portability?
Portability, formally introduced in 2010 and made permanent in 2013, represents one of the most significant changes to estate tax law in recent decades. At its core, portability allows a surviving spouse to use any unused estate tax exclusion from their deceased spouse, effectively doubling the amount a married couple can pass to their heirs free from federal estate tax.
With the current estate tax exclusion at $13.99 million per person in 2025 (rising to $15 million in 2026 and indexed for inflation thereafter), this means a married couple can potentially shelter up to $30 million from estate taxes. Given that the federal estate tax rate is 40%, the stakes are enormous—a couple that loses the first spouse's $15 million exclusion would owe an additional $6 million in taxes.
For perspective, according to the global wealth tracker Altrata, nearly 500,000 Americans have a net worth of $15 million or more. Many of these families are concentrated in metropolitan areas like Atlanta, where successful entrepreneurs, real estate developers, and corporate executives have built substantial wealth. For these families, portability isn't just a nice tax benefit—it's an essential component of their estate planning strategy.
How Portability Works
The mechanics of portability might seem straightforward, but as the Rowland case demonstrates, the devil is truly in the details. When the first spouse dies, their executor must file an estate tax return (Form 706) to elect portability, even if no estate tax is owed. This requirement exists regardless of whether the deceased spouse's estate falls below the filing threshold under Internal Revenue Code Section 6018.
This election must be made on a return that is:
- Timely filed - Generally within 9 months of death (plus a possible 6-month extension for a total of 15 months). However, Revenue Procedure 2022-32 now allows up to 5 years for estates not otherwise required to file, though meeting this extended deadline requires perfect compliance with all other requirements.
- Complete - Including all required information and schedules. This means listing every asset, providing adequate descriptions, and in most cases, including specific valuations. The return must paint a complete picture of the deceased's estate.
- Properly prepared - Meeting all IRS requirements for accuracy and detail. This includes following specific formatting requirements, checking the right boxes, and ensuring all elections are properly made.
The surviving spouse can then add the deceased spouse's unused exclusion (DSUE) to their own exclusion amount. This DSUE amount becomes available immediately and can be used for lifetime gifts or preserved until the surviving spouse's death.
The Historical Context of Portability
Before portability existed, estate planning for married couples was significantly more complex. Attorneys routinely drafted elaborate trust structures—including bypass trusts, credit shelter trusts, and QTIP trusts—to ensure that both spouses' exclusion amounts were fully utilized. These plans often required dividing assets between spouses and funding trusts at the first death, which could be cumbersome and sometimes resulted in unintended consequences.
Portability was intended to simplify estate planning, particularly for couples with estates below the combined exclusion amount. In theory, it eliminated the need for complex trust planning in many cases. However, as the Rowland case illustrates, portability comes with its own set of technical requirements that, if not properly followed, can result in devastating consequences.
Critical Lessons from the Rowland Case
Details Matter More Than You Think
The Rowland estate attempted to use a special IRS rule found in Treasury Regulation 20.2010-2(a)(7)(ii) that allows estimated values for certain assets on portability-only returns. This rule was designed to reduce the burden on estates that wouldn't otherwise need to file a return, allowing them to estimate values in $250,000 increments rather than obtaining precise appraisals.
However, this seemingly helpful rule has strict limitations that many practitioners and executors don't fully understand:
- It only applies to assets passing entirely to a spouse or charity - If even a small portion of an asset goes to another beneficiary, the special rule cannot be used for that asset.
- It cannot be used when specific bequests go to other beneficiaries - In Fay's case, she left gifts to children, grandchildren, and friends, which disqualified her estate from using the special valuation rule.
- It doesn't work with percentage-based distribution formulas - Fay's estate plan included provisions that 20% of her trust estate would pass to a charitable foundation and one-quarter of her gross estate would pass to Billy. These percentage-based formulas require knowing the exact value of the estate to calculate the distributions.
- It cannot be used if a GST tax election is made - Any allocation of Generation-Skipping Transfer (GST) tax exemption, including through a reverse QTIP election, prevents use of the special valuation rule.
The Tax Court was unsympathetic to the estate's arguments, noting that the failure to include specific valuations prevented the IRS from doing its job of verifying the accuracy of the DSUE amount.
The IRS Can Review Old Returns—Forever
One of the most shocking aspects of the Rowland case for many families is the revelation that the IRS can review a deceased spouse's estate tax return years or even decades after it was filed. Treasury Regulations Sections 20.2010-2(d) and 20.2010-3(d) specifically permit the IRS to examine a return filed for portability purposes to determine the accuracy of the DSUE amount, even if the statute of limitations has long since expired.
This means that even if a surviving spouse dies 15 or more years after the first spouse (portability has been available since 2011, so we're approaching the point where this timeframe is possible), the IRS can still examine the first spouse's Form 706 for purposes of determining the DSUE available to the surviving spouse. Any errors discovered at that point—when both spouses are deceased and original advisors may be retired or unavailable—can be nearly impossible to correct.
This unlimited look-back period creates a unique risk in estate planning. Most tax matters have a statute of limitations—typically three to six years—after which the IRS cannot challenge a return. But with portability, the sword of Damocles hangs indefinitely over the surviving spouse's estate.
"Substantial Compliance" Isn't Enough
Billy's estate made several arguments trying to save the DSUE amount, including that they had "substantially complied" with the requirements. The estate argued that any errors should be excused on the grounds that the regulations were murky and that they had done everything reasonably possible to comply with the requirements.
The Tax Court firmly rejected this argument, stating that Fay's return "does not include the fair market value at date of death of any such item" in her gross estate. The court characterized the omissions not as a "mere foot-fault" but as a fundamental failure that prevented the IRS from verifying the accuracy of the DSUE amount.
The estate also argued for equitable estoppel—essentially claiming that it would be unfair for the IRS to challenge the return so many years later. This argument also failed, with the court finding that the requirements for equitable estoppel against the government had not been met.
The Timing Trap
An interesting technical issue arose regarding the timeliness of Fay's return. While the return was filed late according to the standard deadline, it was filed within the extended timeframe allowed by Revenue Procedure 2017-34. However, because the return failed to meet the other requirements of the Revenue Procedure—namely being "complete and properly prepared"—the entire safe harbor failed.
This creates a catch-22 situation: the extended deadline is only available if the return is perfect in all other respects. Any error in the return not only jeopardizes the DSUE amount but also makes the return untimely, eliminating any possibility of correction.
Protecting Your Family's Portability Election
For Georgia Families: Key Action Steps
File the Estate Tax Return Properly and Timely
Even if your spouse's estate is well below the filing threshold, file Form 706 within the standard 9-month deadline (with extensions if needed) to preserve portability. Don't rely on the extended deadlines available under Revenue Procedures unless absolutely necessary. Work with an experienced estate tax attorney or CPA who understands the technical requirements and has a track record of successfully preparing these returns.
Consider that the cost of properly preparing a Form 706—typically ranging from $5,000 to $15,000 depending on complexity—is minimal compared to the potential tax savings. In the Rowland case, what was likely an attempt to save a few thousand dollars on professional fees or appraisals cost the family $1.5 million.
Include Complete Valuations
Don't cut corners on asset valuations. Include specific values for every asset, especially if:
- Any beneficiaries other than the spouse or charities inherit assets
- The estate plan uses percentage or formula-based distributions
- Hard-to-value assets like business interests are involved
- Real estate holdings are significant
- Collectibles, art, or other specialty assets are present
Remember that the IRS may review these valuations many years later, when records may be harder to locate and memories have faded. Contemporaneous documentation is crucial.
Meet All Deadlines
While the IRS has extended certain deadlines for portability-only returns (now up to 5 years in some cases under Revenue Procedure 2022-32), it's always safer to file within the standard 9-month deadline plus extensions. These extended deadlines come with strings attached and offer no room for error.
If you've missed the deadline, don't simply assume all is lost. Consult immediately with an experienced practitioner who can evaluate whether relief is available under the Revenue Procedures or through a Private Letter Ruling request under Treasury Regulation 301.9100-3.
Consider Professional Appraisals
For valuable real estate, business interests, or collectibles, obtain professional appraisals from qualified appraisers. The cost of proper valuations—typically $2,000 to $10,000 per asset depending on complexity—is minimal compared to the potential tax savings and the peace of mind that comes from knowing the values will withstand IRS scrutiny.
Keep in mind that these appraisals also establish the basis for inherited assets under IRC Section 1014, which can save significant capital gains taxes when heirs eventually sell the assets.
Review Existing Estate Plans
If you're relying on a deceased spouse's DSUE, have your attorney review the original filing now, while there may still be time to make corrections. Don't wait until your own estate tax return is being prepared to discover problems with the portability election.
This review should include:
- Confirming the return was timely filed
- Verifying all assets were properly valued
- Ensuring all required schedules were completed
- Checking that the portability election box was properly marked
- Reviewing whether any GST tax elections were made
Document Everything
Maintain comprehensive records of all estate planning documents, tax returns, appraisals, and correspondence with the IRS. Store these documents in multiple locations—physical and digital—and ensure your executor knows how to access them. Consider providing copies to your attorney or CPA for safekeeping.
Consider State Estate Taxes
While Georgia doesn't currently have a state estate tax, if you own property in other states or are considering a move, be aware that many states have their own estate taxes with much lower thresholds than the federal exemption. Portability generally doesn't apply to state estate taxes, so additional planning may be necessary.
Special Considerations for Atlanta Business Owners
Many successful Atlanta entrepreneurs and business owners have estates that fall into the $15-30 million range where portability becomes crucial. The city's thriving business environment—from tech startups in Midtown to established manufacturing companies in the industrial corridors—has created significant wealth for many families. The Rowland case particularly impacts those with:
Closely-Held Business Interests
Valuing a family business is one of the most complex aspects of estate tax planning. The IRS scrutinizes these valuations carefully, looking at factors such as:
- Financial performance and projections
- Market comparables
- Minority interest and marketability discounts
- Buy-sell agreements and their terms
- Industry trends and economic conditions
For portability purposes, these valuations become even more critical because they may not be reviewed for many years. Working with a qualified business valuation expert who understands IRS requirements is essential.
Complex Estate Plans with Multiple Beneficiaries
Many successful Atlanta families have estate plans that provide for multiple generations, favorite charities, and sometimes business partners or key employees. These plans often use formulas to divide assets—for example, leaving an amount equal to the estate tax exemption to a bypass trust with the remainder to a marital trust.
Such formulas require precise valuations to calculate properly. The Rowland case makes clear that you cannot use the special valuation rule when such formulas are present, even if the ultimate beneficiaries are all qualifying recipients.
Formula-Based Charitable Giving Provisions
Atlanta has a strong tradition of philanthropy, with many wealthy families including charitable provisions in their estate plans. Whether it's supporting Emory University, the High Museum, Children's Healthcare of Atlanta, or smaller local charities, these gifts often use percentage-based formulas.
As the Rowland case demonstrates, percentage-based charitable gifts require full valuations of all estate assets to calculate the charitable deduction properly. This requirement exists even if 100% of the estate is passing to spouse and charity.
Specific Bequests to Family Members
It's common for estate plans to include specific bequests—$50,000 to a niece, $100,000 to a longtime employee, or a piece of jewelry to a daughter. While these may seem like minor provisions in a multi-million dollar estate, they can disqualify the entire estate from using the special valuation rule for portability returns.
The Impact of Recent Tax Law Changes
The estate tax landscape has changed dramatically in recent years, making the lessons from the Rowland case even more relevant:
Historic High Exemptions
The estate tax exclusion has never been higher than it is today. In 2025, it stands at $13.99 million per person, rising to $15 million in 2026. This represents a dramatic increase from the $5.45 million exemption in place when Fay Rowland died in 2016.
These high exemptions mean that fewer families need to worry about estate taxes, but for those who do, the stakes are higher than ever. A married couple can now shelter $30 million from estate taxes—but only if portability is properly preserved.
Inflation Adjustments
The estate tax exemption is now indexed for inflation, meaning it will continue to grow over time. This makes portability even more valuable, as the DSUE amount from a deceased spouse will effectively grow with inflation if preserved properly.
Uncertainty About Future Changes
While the current exemption levels are permanent under current law, there's always the possibility of future changes. Some proposals have suggested reducing the exemption to as low as $3.5 million per person. If such changes occur, having a preserved DSUE amount could become even more critical.
Common Mistakes to Avoid
Beyond the specific issues in the Rowland case, there are several other common mistakes that can jeopardize portability:
Failing to File Any Return
Some families mistakenly believe that if no estate tax is owed, no return needs to be filed. This is incorrect—a return must be filed to elect portability, regardless of the estate's size.
Missing the GST Tax Implications
Generation-skipping transfer tax adds another layer of complexity. Unlike the estate tax exemption, GST exemption cannot be preserved through portability. However, certain elections on the estate tax return—particularly the reverse QTIP election—can preserve GST exemption but may complicate or prevent the use of the special valuation rule.
Inadequate Record Keeping
Executors sometimes file the return but fail to maintain adequate records. Years later, when the surviving spouse dies, the family cannot locate the original return or supporting documentation. This can make it difficult or impossible to claim the DSUE amount.
DIY Returns
Some executors attempt to prepare Form 706 themselves or use general tax preparers unfamiliar with estate tax returns. Given the complexity and high stakes involved, this is almost always a mistake. The Form 706 is one of the most complex tax returns, with numerous schedules, elections, and technical requirements.
Ignoring Basis Considerations
While the special valuation rule specifically excludes basis determination as a disqualifying factor, executors still have a fiduciary duty to establish basis for inherited assets. Failing to properly document basis can result in unnecessary capital gains taxes when heirs sell inherited assets.
The Role of Professional Advisors
The Rowland case underscores the critical importance of working with experienced professionals when dealing with estate tax matters:
Estate Planning Attorneys
An experienced estate planning attorney can help structure your estate plan to maximize tax savings while avoiding the pitfalls highlighted in the Rowland case. They can also ensure that your plan works harmoniously with portability elections and doesn't inadvertently create problems.
CPAs and Tax Professionals
A CPA experienced in estate tax matters can properly prepare Form 706, ensuring all requirements are met. They can also advise on the interplay between estate taxes, income taxes, and generation-skipping transfer taxes.
Valuation Experts
For estates with hard-to-value assets, professional appraisers and valuation experts are essential. Their reports provide the documentation needed to support values reported on the estate tax return and can defend against IRS challenges years later.
Financial Advisors
Financial advisors can help with the practical aspects of estate administration and tax payment, ensuring sufficient liquidity to pay taxes without forced sales of assets.
Planning for the Future: Beyond Portability
While portability is a valuable tool, it shouldn't be the only arrow in your estate planning quiver:
Consider Trust Planning
Despite the availability of portability, trust planning still offers advantages:
- Protection from creditors and lawsuits
- Control over distributions to heirs
- Generation-skipping planning opportunities
- State estate tax planning
- Basis adjustment opportunities
Annual Gifting Strategies
Using annual exclusion gifts ($18,000 per recipient in 2025) and lifetime exemption gifts can reduce your taxable estate over time. These strategies work in conjunction with portability to maximize tax savings.
The Bottom Line: An Ounce of Prevention
The Rowland family's $1.5 million mistake serves as a cautionary tale that reverberates far beyond their specific situation. It could have been avoided with proper attention to detail when filing Fay's estate tax return. As Atlanta estate planning attorneys, we've seen how technical errors can devastate families years after a loved one's death, turning what should be a time of grieving and remembrance into a battle with the IRS.
The case also highlights a fundamental tension in the tax law: the IRS's attempt to simplify estate tax filings through the special valuation rule actually created a trap that ensnared the Rowland family. The very provision designed to help them ended up being their downfall because they didn't fully understand its limitations.
With the estate tax exclusion at historic highs—$15 million per person in 2026—now is the time to ensure your portability election is properly documented. The cost of getting it right is insignificant compared to the potential tax savings for your family. Consider that at a 40% tax rate, preserving a $15 million DSUE amount saves $6 million in taxes—enough to fund college educations for generations of grandchildren, support favorite charities, or simply provide greater financial security for your heirs.
Take Action Today
If you've lost a spouse and haven't yet filed for portability, or if you're relying on a previously filed portability election, don't wait to verify everything is in order. The Rowland case shows that the IRS takes these requirements seriously, and mistakes discovered years later can be financially devastating and nearly impossible to correct.
For those who haven't yet faced these decisions, now is the time to review your estate plan and ensure it's structured to work harmoniously with portability requirements. Don't let your family become another cautionary tale in Tax Court.
At Slowik Estate Planning, we help Atlanta families navigate the complex requirements of portability elections and estate tax planning. Whether you need to file a portability return, review an existing election, or plan for the future, we're here to ensure your family doesn't become another cautionary tale. Our experience with high-net-worth families throughout metro Atlanta—from Buckhead to Johns Creek, from Alpharetta to Peachtree City—means we understand the unique challenges and opportunities facing successful Georgia families.
We take a comprehensive approach to estate planning that goes beyond just tax savings. We help you create a legacy that reflects your values, protects your family, and preserves your wealth for future generations. The Rowland case reminds us that in estate planning, as in life, the details matter—and getting those details right requires experience, expertise, and attention to the nuances that can make millions of dollars of difference.
For more information about estate tax planning and portability elections, contact Slowik Estate Planning in Atlanta, Georgia. We serve families throughout the metro Atlanta area and across Georgia with sophisticated estate planning strategies designed to preserve wealth for future generations.
