Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Marital Deduction

What it is:

The marital deduction refers to the deduction the IRS allows for a taxpayer to transfer some or all of his assets tax free to his spouse prior to the calculation of estate tax owed by his estate.

How it works (Example):

The marital deduction is also known as the unlimited marital deduction.

The IRS treats a married couple as one economic entity. Estate tax is imposed only upon the demise of that economic entity. The marital deduction from the estate tax due is allowed upon the death of either husband or wife, as long as the spouse is a US citizen.

Upon the death of the surviving spouse, the entire remaining estate is taxed. Certain tax planning strategies are available to minimize this total effect.

Why it Matters:

This marital deduction is important to take into estate planning considerations as the estate tax due on the entire estate of the husband and the wife is postponed until the demise of both.