Marital Deduction

Plain English

The marital deduction is a federal tax rule that allows you to leave an unlimited amount of property to your spouse without owing federal estate tax or gift tax. It's one of the biggest tax breaks in the estate tax system. The catch is that the property must pass to your spouse in a way that qualifies—usually outright or in a special trust called a QDOT or QTIP trust. When your spouse later dies, that property may be subject to estate tax in their estate. The marital deduction is especially valuable for married couples with large estates, as it lets them defer taxes until the second spouse dies.

Example

Howard has an estate worth $15 million. He leaves $10 million to his wife, Claire, and $5 million to his children. Because of the marital deduction, the $10 million to Claire is not subject to federal estate tax. Only the $5 million to his children is taxed (and even that may be protected by his individual exemption).

Used in a sentence

“The marital deduction allowed the surviving spouse to inherit the entire estate without triggering federal estate taxes.”

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