Marital Deduction Trust
A marital deduction trust is any trust that is designed to defer the estate tax at the death of the first spouse by holding assets for the surviving spouse in such a way that the predeceased spouse’s estate will qualify for the estate tax marital deduction. The estate tax is not eliminated but will be deferred until the time of the surviving spouse’s death, at which time any assets remaining in the marital deduction trust will be included in the surviving spouse’s estate for estate tax purposes. Many times when you use Revocable Trust planning, you will direct part or all of your assets to the surviving spouse in the form of a marital deduction trust.
A marital deduction trust can also be used for purposes to avoid guardianship of an incapacitated spouse.
If a marital deduction trust is going to qualify for the marital deduction for estate tax purposes, it is necessary for all of the income of that trust to be distributed to the surviving spouse on at least an annual basis. It is also necessary that the surviving spouse be the only permissible income beneficiary. Otherwise, the marital deduction trust will not qualify for the estate tax marital deduction.
Two types of marital deduction trust are the QTIP Trust (Qualified Terminable Interest Property Trust) and Qualified Domestic Trust.
Call The Law Office of Mary Beth Kelly, LLC in Lake Mary at 407-536-6901 or send an email to discuss the potential tax benefits of a marital deduction trust today.