When to Use the Marital Deduction in DC

Using the marital deduction is one way that DC estate and trust attorneys plan for estate taxes. A DC marital deduction is often used to build in provisions into either a last will and testament or into a revocable living trust that maximizes the first spouse to die’s marital deduction.

Using The Marital Deduction

If a married couple – who are both US citizens – have joint marital assets of $3 million, there is the option to include provisions that provide for disclaimer planning.  Disclaimer planning typically provides for the surviving spouse to receive the assets at the death of the first spouse, outright and free of trust.  However, if the surviving spouse chooses to disclaim any portion or percentage of his or her inheritance, the disclaimed assets would be used to fund a trust for the surviving spouse’s benefit.  This type of a trust is often referred to as a bypass trust.  Often, this allows for the option to maximize the use of DC estate tax exemption at the death of the first spouse, so that the surviving spouse’s estate tax liability is minimized.

Often, the marital deduction is used to defer taxes from the death of the first spouse to the death of the second spouse but is used as part of an overall comprehensive plan to minimize the estate tax liability for a married couple.

Maximizing the Marital Deduction

Determining the amount of assets to disclaim at the death of the first spouse is done on a case by case basis. At the death of the first spouse, all of the assets are valued, and an estate planning attorney, sometimes in conjunction with the family’s accountant will review the value of the assets, the current financial needs of the surviving spouse, and the current tax laws to determine what options are available for post-mortem planning that may allow for minimizing the couple’s combined estate tax liability.

Generally, there are several ways that assets can qualify for a marital deduction and there are several ways to pass the property on so that it does qualify for a marital deduction.

A trust and estates attorney can draft a document or several documents that allow for maximizing marital deduction and for maximizing the use of each spouse’s estate tax exemption. What those clauses are will be dependent on what the needs and the goals of the client are, as well as what his or her overall nature and titling of the couple’s assets are.