Marital Deduction and Unified Credit Strategies
Marital Deduction
The marital deduction is a powerful estate preservation planning tool. It allows you to pass any or all of your assets to your surviving spouse at your death without federal estate tax! But this doesn't solve your family's estate tax problem. Unless your surviving spouse remarries, the assets you transferred, along with your spouse's assets, will be subject to estate tax at his/her death. As powerful as it is, the marital deduction cannot solve your estate tax problems alone.
Unified Credit
The unified credit allows assets worth up to a certain amount to pass estate tax-free to heirs. This credit is available to every estate, but is often overlooked. Starting in 2002 and through 2009, the top estate- and gift-tax rates will be reduced, and the unified credit effective exemption amount for estate tax purposes will increase in steps according to the following table:
| Calendar Year | Estate Tax Transfer Exemption | Highest Estate and Gift Tax Rate |
|---|---|---|
| 2002 | $1 million | 50% |
| 2003 | $1 million | 49% |
| 2004 | $1.5 million | 48% |
| 2005 | $1.5 million | 47% |
| 2006 | $2 million | 46% |
| 2007 | $2 million | 45% |
| 2008 | $2 million | 45% |
| 2009 | $3.5 million | 45% |
| 2010 | Taxes repealed | 35%1 |
| 2011 | $1 million | 55%2 |
This credit applies to each estate, thus if you and your spouse own most of your assets jointly with rights of survivorship, you are missing an opportunity to lower your heirs' estate taxes.
Note: Note: For other estate planning services (wills and trusts), contact an attorney or other certified professional who specializes in estate planning services.
