The estate tax marital deduction (Section 2056 of the Internal Revenue Code), otherwise called the unlimited marital deduction or more simply the marital deduction, is a valuable estate planning device for certain married couples. It allows one partner to transfer an unlimited amount of assets to his or her spouse without incurring a tax. The marital deduction applies to both estate and gift taxes as well. It’s essential to know that the marital deduction only defers the estate and gift taxes. So, while you do not have to pay them after the first spouse’s death or transfer, the taxes will apply when the surviving spouse passes. The tax burden depends on the estate’s size at the time of this death. Assets can be distributed to the surviving spouse without incurring any estate or gift tax liability.
The federal estate and gift tax exemption is currently $11.7 million per individual and $23.4 million for married couples. Keep in mind that the unlimited marital deduction is only available until the second spouse dies. If the surviving spouse does not spend or deplete the assets during their lifetime and gives the money or property to anyone other than a spouse, they will incur a gift tax. A surviving spouse can share the unlimited marital deduction with their new spouse, if they remarry. They could inherit from the first spouse and gift or leave the property to the second spouse without taxation, but it would be taxed if it were left to other beneficiaries such as children.
While the marital deduction might work perfectly for certain estates, it may need support to be the right choice for yours. Or, the marital deduction might not work for you at all. Regardless of whether you need to bolster your choice or find other ways to minimize your estate plan’s costs, contact our law firm to take advantage of other exemption and deduction options. The estate tax marital deduction is a useful device for many married couples. However, if it’s not the right fit or used incorrectly, it can end up costing the estate more in the long run.
If you and your partner are considering a marital deduction, it’s best that you speak with one of our attorneys at First Class Counsel. They can break down the process and help you both decide if it’s the right choice for you. Most of all, they can guide you to an estate plan that protects you both and your assets, regardless of what the future may bring.
Estate planning comes with a maze of challenges. Unfortunately, getting lost or making a mistake is often costly. We are here to guide you through the process and will design a plan specific to your unique needs and wishes. Contact us today and learn more about the best tax savings estate plan for you and your loved ones.