The estate tax marital deduction—also known as the unlimited marital deduction or the marital deduction—allows one married spouse to transfer an unlimited amount of assets to the other spouse without incurring estate taxes on those assets. The marital deduction is calculated by subtracting the value of the assets passed on or transferred to the other spouse from the total value of the transferring spouse’s gross estate.
A transfer that qualifies for the marital deduction may be made while both spouses are alive or after the death of a spouse, as provided in the deceased spouse’s will.
In California, the estate tax marital deduction aligns with federal law, as California does not impose a state-level estate tax. Under federal law, the unlimited marital deduction allows a married spouse to transfer an unlimited amount of assets to their surviving spouse without incurring federal estate taxes. This deduction applies to transfers made both during life and at death through a will or trust. The value of the assets transferred to the surviving spouse is deducted from the decedent's gross estate, potentially reducing the taxable estate to zero, provided the surviving spouse is a U.S. citizen. It's important to note that while the marital deduction defers estate taxes until the death of the second spouse, it does not eliminate them. Estate planning with an attorney can help couples take advantage of the marital deduction and other strategies to minimize taxes and ensure the efficient transfer of assets.
