Apr 1, 2008 12:00 PM

By Charles A. Redd

A series of private letter rulings over the past several years seemed to indicate that a gift to a predeceased spouse would qualify for the gift tax marital deduction and enable use of that spouse's estate tax applicable exclusion amount. In Estate of Lee, the Tax Court, stating the obvious, recently held that a bequest to a predeceased spouse does not qualify for the estate tax marital deduction. The Tax Court's decision, equally applicable in the gift tax marital deduction context, strongly suggests that practitioners would be wise to adhere to tried-and-true mechanisms for utilizing the estate tax applicable exclusion amounts of both spouses — regardless of who dies first.

Basic estate planning for a married couple with an aggregate net worth larger than one federal estate tax applicable exclusion amount often includes taking steps to ensure that both spouses' applicable exclusion amounts are utilized to the extent necessary to cause the federal estate tax at the death of the surviving spouse is as small as possible. At the beginning of the estate-planning process, planners frequently find one spouse's net worth is a good deal larger than the other's and the other owns property worth far less than one federal estate tax applicable exclusion amount. Traditionally, the estate planner recommends in this situation that the wealthier spouse transfer to the less wealthy spouse, by inter vivos outright gift, assets with a value that likely will be sufficient to enable full use of the less wealthy spouse's applicable exclusion amount if the less wealthy spouse is the first spouse to die. Such an inter vivos gift obviously qualifies for the federal gift tax marital deduction.¹

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

Poll

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

Click here to download the 2011 Trust Glossary

50 Years Ago This Month

Click here to read the issue.

50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

Click here to view the most up to date guide (September 2011)

Press Releases