As we discussed in the previous blog, there are a few ways to protect your estate from taxes. One such way is by taking advantage of the federal marital deduction. It is important to understand how this deduction works so that you can properly organize your estate plan and avoid the negative consequences of an inadequate plan.
What is the marital deduction?
The marital deduction allows an unlimited number of lifetime and testamentary, tax-free transfers from one spouse to another. Basically, this deduction allows you to give your assets to your spouse, before or after death, while reducing or even eliminating taxes on those assets.
Who qualifies for the marital deduction?
The marital deduction encompasses the entire value of the property given to your spouse. In order for your property to qualify for this deduction:
- You must be survived by a spouse (to whom you are legally married);
- Your property must pass from you to your spouse;
- Your property must be included in your gross estate; AND
- Your property must be transferred outright, not as a life estate.
Can I afford legal help?
The main goal of a proper estate plan is to protect your assets so that they will pass to your loved ones rather than to fees and government costs. A good estate planning attorney will serve as an advocate for you, your family, and your property.
Understanding estate taxes and deduction opportunities, among the many other intricacies of estate planning, can be complicated. It is a good idea to consult a competent attorney who can help you through the process. Spending a small amount of money now to put into place a proper estate plan can have enormous financial benefits to you and your loved ones later on.