Federal Estate Tax Exemption 2025: What Montana Executors Need to Know

If someone died in Montana in 2025 and you're the executor trying to figure out whether the estate owes federal estate tax, the answer for almost every family is no. The 2025 federal estate tax exemption is $13.99 million per individual. An estate has to be extraordinarily large before a single dollar of federal estate tax is owed.

But "owe no tax" does not automatically mean "file nothing." One of the most expensive mistakes Montana executors make is assuming that because the estate falls below the threshold, they have no action to take with the IRS. For married decedents especially, that assumption can cost surviving spouses millions of dollars in future tax exposure.

Here is what the 2025 exemption actually means, what Montana executors are required to do, and the one filing that matters even when no tax is owed.

What the 2025 Federal Estate Tax Exemption Covers

The federal estate tax is a tax on the right to transfer wealth at death. It is assessed on the gross value of everything the decedent owned or had an interest in — bank accounts, real estate, investment portfolios, life insurance proceeds paid to the estate, business interests, and personal property.

For deaths occurring in calendar year 2025, the exemption is $13.99 million per individual, as confirmed by IRS Revenue Procedure 2025-32. Estates with a gross value below that threshold owe zero federal estate tax. Estates above that threshold pay a top marginal rate of 40 percent on the excess.

Montana does not have a state estate tax. Montana repealed its state estate tax for deaths occurring after December 31, 2004, and repealed its inheritance tax for deaths occurring after December 31, 2000. So for a Montana decedent who died in 2025, the state-level tax question is entirely off the table. The only potential tax exposure is federal.

For context, the vast majority of Montana estates never come close to the federal threshold. The median Montana home value is roughly $350,000, and most family estates consist of a home, a few financial accounts, a vehicle, and personal property. That composite estate would need to be forty times the size of a typical Montana ranch home to generate federal estate tax liability.

Why Montana Executors Still Need to Think About Form 706

IRS Form 706 is the U.S. Estate (and Generation-Skipping Transfer) Tax Return. You are legally required to file it if the gross estate exceeds $13.99 million. But the form matters to a much broader group of estates than just the ultra-wealthy.

The reason is portability.

When a married person dies, any portion of their $13.99 million exemption they did not use can be transferred to the surviving spouse. This "deceased spouse's unused exclusion" — called the DSUE — effectively allows the surviving spouse to protect up to $27.98 million of combined wealth from federal estate tax when they eventually die.

Portability does not happen automatically. It requires the executor to file Form 706 within nine months of the date of death, electing portability. An automatic six-month extension is available, pushing the outside deadline to fifteen months from death.

The practical problem: many executors of smaller estates never file Form 706 because the estate is nowhere near the taxable threshold. They correctly determine that no tax is owed and stop there. Years later, when the surviving spouse dies with an estate that has grown — perhaps a second inheritance, accumulated savings, or appreciated real estate — the family discovers that the DSUE was never elected and the exemption is gone. The tax bill that results can be far larger than the cost of filing a zero-tax return nine months after the first death.

The Five-Year Relief Window

The IRS recognized that many surviving spouses miss the portability deadline because they were never aware of it. Revenue Procedure 2022-32 provides extended relief: estates that were not otherwise required to file a federal estate tax return (because the estate was below the taxable threshold) have up to five years from the date of death to file Form 706 solely to elect portability.

This means if a Montana resident died in 2023 and the executor never filed a portability return, there is likely still time. If they died in 2022, the window may be closing. If the death occurred in 2025, the five-year window gives the surviving spouse until 2030 — but the standard nine-month deadline remains the cleanest path.

There is an additional consideration under Revenue Procedure 2026-17, which provides relief for certain amendments and adjustments related to elections made in tax years 2022 through 2024. Executors dealing with returns from those years should verify applicable deadlines with a CPA familiar with Montana estate administration.

What a Portability Return Looks Like for a Non-Taxable Estate

Filing Form 706 solely to elect portability is simpler than filing because the estate owes tax. The IRS allows executors of non-taxable estates to use a simplified asset valuation method — a good-faith estimate of fair market value — rather than requiring formal professional appraisals for every asset.

The return still needs to be complete. You will need the decedent's Social Security number, the dates and valuations of all major assets, documentation of any debts and deductions, and a clear statement at the top of the return identifying it as filed under the relevant Revenue Procedure. The language at the top matters: IRS instructions specify that late portability returns must cite the applicable procedure explicitly.

Montana's county recording fees, probate costs, and administrative expenses paid during estate settlement may be deductible on the federal return as estate administration expenses. Keep documentation of every fee paid to the District Court, every recording fee paid to the County Clerk and Recorder, and any CPA or attorney fees.

Estates Above the Threshold: What Montana Executors Face

For the rare Montana estate that exceeds $13.99 million, the filing requirements are mandatory and the deadlines are firm. Form 706 must be filed, and estate tax owed must be paid, within nine months of the date of death. An automatic six-month extension is available for filing, but any estimated tax owed is still due at the nine-month mark — the extension only covers the paperwork, not the payment.

Montana's favorable tax environment does not insulate high-net-worth estates from federal exposure. An agricultural operation with significant acreage, a commercial real estate portfolio, or a substantial business interest can push an estate well above the threshold. The 40 percent rate on the excess above $13.99 million is significant. At $20 million gross estate, approximately $2.4 million in federal estate tax would be owed.

Strategic planning matters in these situations. The marital deduction allows assets passing to a surviving US citizen spouse to be excluded from the taxable estate entirely, deferring any federal estate tax until the surviving spouse's death. Charitable deductions for assets passing to qualifying organizations are similarly excluded. These are not Montana-specific rules — they are federal — but they apply to Montana estates just as they do everywhere.

One Action Worth Taking Now

If someone died in Montana in 2025 or 2024 and was married, and no one has filed Form 706, the surviving spouse should get a CPA opinion on whether portability should be elected. The calculation is straightforward: estimate the surviving spouse's likely estate at their own death, factor in appreciation, and determine whether having the extra exemption changes the federal tax outcome.

The consultation costs a fraction of what a missed portability election can cost. For most Montana families, the answer will be that portability is worth electing even if it costs several hundred dollars to prepare the return. For families with larger agricultural or investment estates, it is almost always worth it.

The Montana Final Tax and Estate Tax Guide covers the complete federal and state tax picture for Montana estates — including Form 706 deadlines, portability election mechanics, the simplified valuation method for non-taxable estates, and how fiduciary income taxes on estate earnings (Montana Form FID-3) interact with the federal return. It is built for executors working through this without a law degree.

The 2026 Exemption and Future Uncertainty

For deaths occurring in 2026, the exemption increased to $15 million per individual under the One Big Beautiful Bill Act (Public Law 119-21). The paired portability threshold for married couples is $30 million.

Montana executors settling 2025 estates work under the $13.99 million figure. Any estate that generated post-mortem income before distribution — rental income, dividends, capital gains from selling inherited assets — also owes Montana fiduciary income tax via Form FID-3, which carries a top rate of 5.9 percent on ordinary income and 3 to 4.1 percent on net long-term capital gains. That is a separate obligation from the federal estate tax return and carries its own April 15 deadline.

The two tax obligations exist simultaneously. Settling one does not satisfy the other. Most executors find it most efficient to work through the federal and state tax calendars together, with the help of a CPA who handles Montana estate administration.

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