Marital Deduction

Question 1

Describe the unlimited marital deduction and who qualifies?

Answer 1

• Married couples who are US citizens, regardless of where they live, are entitled to transfer UNLIMITED amounts of gifts and bequests to each other without triggering estate or gift tax
• Remember that taxes on these transfers are only DEFERRED until the surviving spouse passes
• Only available to US citizens
  
  • If transfers are to a non US citizen, can use smaller exclusion amount.

Question 2

QDOT

Answer 2

• Qualified domestic trust
• Can be established to hold assets that generate income for a surviving NON US CITIZEN spouse married to a US citizen
• Survivng spouse receives income for life and then any assets are sbuject to federal taxation when surviving spouse passes

Question 3

What elements must exist to qualify for marital deduction?

Answer 3

• Spouse receving assets must have TOTAL OWNERSHIP of the property
• Property must meet qualified terminable-interest property rules (QTIP)

Question 4

What is terminable interst?

Answer 4

• When the surviving spouse only has a LIFETIME INTEREST, such as receiving lifetime income, but doesn’t have power to appoint assets
• Doesn’t have general power of appointment
• Not eligible to use marital deduction for these

Question 5

A-trust vs B-trust qualification for martial deduction

Answer 5

• A does (general power) and B doesn’t qualify

Question 6

What is portability

Answer 6

• When the surviving spouse can use the first-to-die spouse’s UNUSED exclusions amounts
• FOR MARRIED PEOPLE
• In order to use, the estate who was married must file an estate tax return to pass the unused gift and estate tax exclusion to the surviving spouse