Husband and wife: For a husband and wife, there is an unlimited marital deduction available that will allow property of the first spouse to die to pass to the surviving spouse without the payment of estate tax, thus preserving the property to support the survivor. To the extent that the assets are not consumed, they may be taxable in the survivor’s estate. The surviving spouse may take advantage of any estate tax deduction unused in the estate of the first spouse to die.
Marital deduction. If a bequest to a spouse is a dollar value either as specified or ascertainable by formula, the estate may have a taxable gain or loss if the bequest is satisfied in appreciated or depreciated property. This can be avoided by phrasing the bequest in terms of a share of the estate. A marital deduction is permitted between domestic partners following the holding that a provision relating to “his” in the Defense of Marriage Act has been held to be unconstitutional. The issues of domestic partners are currently being litigated in various courts.
Computation of the marital deduction. The valuation of property passing to a surviving spouse is based on fair market value as of the valuation date. Adjustments must be made for administrative expenses. These expenses fall into 2 classes, transmission expenses, the appropriate share of which reduces the marital deduction, and management expenses, which do not reduce the marital deduction unless they are allocable to other property. Transmission expenses include: all expenses arising by reason of the decedent’s death, such as fiduciary commissions, legal fees, appraisal fees, will construction and contest costs. Management expenses include: interest expense, brokerage commissions, and investment advisory fees. A mandatory direction in the will that expenses and taxes be paid out of the nonmarital share or a provision granting the executor discretion to do so preserves the full deduction. If there is no such provision, the residual estate bears the estate tax without apportionment among specific legatees.
Property passing to spouse. If property is included in the decedent’s estate, it does not matter how the surviving spouse acquires it. It could be acquired by gift, bequest, intestacy, survivorship, operation of law, antenuptial agreement, compromise of will contest, election of statutory share (the share to which a surviving spouse is permitted and which such spouse is entitled to take, even if the will provides less.), or written disclaimer by another within 9 months of the death which results in property passing to the surviving spouse. Property held by the decedent and the surviving spouse by the entireties is included at ½ of its value, but if it passes outside of the estate through a trust, it must be converted to ownership by the surviving spouse so that it passes as probate property in order to qualify for the marital deduction. The deduction is limited to the value of probate assets actually passing to the surviving spouse. In the case of simultaneous death, the decedent’s spouse is considered as surviving if the will or local law so provides. A clause in the will that the spouse is considered as predeceasing controls as to bequests except as to joint property. Under the Uniform Simultaneous Death Act each joint tenant is treated as having survived as to his or her own interest.
To make sure that you are protected Estate Tax husband and wife, it is crucial that you contact skilled and experienced Attorney C. Stephen Gurdin Jr. a Pennsylvania Estate Planning lawyer.
Call Attorney C. Stephen Gurdin Jr. at his Gurdin Law Wilkes-Barre-Scranton Pennsylvania area office today, 570.826.0481 toll free 1.800.221.0618.email Stephen@gurdinlaw.com to schedule a free consultation.
Regular Office hours 2:30 and 7 p.m. Monday through Friday by appointment. Earlier appointments available upon request.