Marital Deduction

Marital Deduction

The Marital Deduction is a provision in the U.S. tax code that allows a spouse to transfer assets to their partner without incurring federal estate or gift taxes. This deduction applies to both inter-spousal transfers made during life and those made at death.

The primary purpose of the Marital Deduction is to ensure that spouses can support one another financially without the burden of taxation during transfers. For estate tax purposes, an unlimited marital deduction means that any property transferred to a surviving spouse is excluded from the gross estate of the deceased spouse.

For example, if a husband leaves his entire estate worth $1 million to his wife upon his death, that amount is not subject to estate tax due to the Marital Deduction. This provision is crucial for estate planning as it allows couples to maximize their wealth transfer without immediate tax consequences.