Along with the charitable contributions, the marital deduction is one of the most often used deductions in estate planning. Pursuant to federal estate tax laws, the gross probate estate is subject to tax, but there are way to minimize estate taxes. If you are married, you can decrease the value of the your taxable estate by creating a marital deduction trust. Such a trust allows property to transfer to a surviving spouse, tax free.
A trust is a fiduciary agreement that allows a third party, or a trustee, to hold assets on behalf of a beneficiary until specified moment of time. In a marital deduction trust, spouses agree to put their property and assets into a trust with the other spouse named as the beneficiary. Upon the death of one spouse, the property will transfer to the surviving spouse. The transfer of the property to the surviving spouse has no tax implications, even if it exceeds the federal estate tax exemption for the year. The surviving spouse will not owe any federal estate taxes on the assets and property because the trust shields the assets and estate.
Upon the death of the surviving spouse, the assets and property under trust are not included in her estate, thereby her estate will not owe as high of estate taxes. However, the tax benefit is null if the property is not protected in the trust.
A marital deduction trust should be written by a qualified attorney. Our experienced Massachusetts attorneys at McGinn Law PC provide expert estate planning services. Contact our office today for a confidential consultation.