What are the benefits?
The most important deduction a married couple has is the The Marital Deduction. The amount of assets which can be passed upon death from one spouse to the other is unlimited and is also used to defer ALL estate taxes until the surviving spouse passes. Current tax laws allow one spouse to give the other spouse assets where there is little to no tax imposed upon the transfer of these assets. No matter what the value of the assets which are being transferred, whether it is $50,000 or $50,000,000.
What if there is a divorce?
If you happen to be divorced from your spouse, you can still pass assets to the ex-spouse after you pass with little or no tax being imposed if it is stated in the divorce decree.
My spouse is not a U.S. Citizen – Do the same tax laws apply?
The Marital Deduction is unlimited as long as both spouses are U.S. Citizens. So what happens when one of the spouses is not a US Citizen?
Should the first spouse to pass away be a U.S. Citizen and the surviving spouse a noncitizen of the U.S., unfortunately the unlimited marital deduction for Federal Estate Taxes is not available.
However, the taxes can be deferred by setting up a Qualified Domestic Trust (AKA QDOT), and having the assets pass through this specialized trust.
Should you own real property, consider adding this to the trust as the taxes will be deferred until the noncitizen spouse passes away.
For more information on The Marital Deduction and implementing other tax savings ideas as part of your Estate and Tax Planning, contact Daniel A. Baron of Baron Law to maximize tax savings upon your passing. Contact us today at 216-573-3723.