Wills and Estates

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What is a Marital deduction?

One of the most important deductions in arriving at the taxable estate for federal estate tax is the marital deduction. This deduction allows a married couple to avoid federal estate tax altogether at the death of the first spouse by providing for an unlimited deduction for property passing to the surviving spouse. IRC Sec. 2056. Taking full advantage of this provision is not always advisable. Since each spouse has a $600,000 exemption equivalent from federal estate tax, it is oftentimes more prudent to do estate planning to maximize this exemption than to take the full marital deduction. When both spouses have a large estate, it can actually increase the overall tax liability to use the unlimited marital deduction. For couples with combined estates well below $600,000, the use of the unlimited marital deduction may work well. Assuming the estate of the surviving spouse does not grow to exceed $600,000, then all federal estate tax is avoided. See question on Federal Estate Taxes for an explanation of the $600,000 exemption.

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