Estate Tax Law

An estate pays the taxes for any property valued in excess of the estate tax exemption. By statute, the exemption amount changes yearly. Commonly, estate tax planning considerations include:

• Marital Deduction: Through the marital deduction, all property passes tax-free to a spouse upon the other spouse’s death. Any property remaining in excess of the estate tax exemption would be taxable upon the receiving spouse’s death.
• Bypass Trust: A bypass trust passes the amount of property up to the estate tax exemption into a trust that allows for the remainder to pass tax-free to the spouse under the marital deduction. The property in the trust may be sheltered from estate tax. Trust beneficiaries may use distributions from the trust for health, maintenance and support purposes.
• Qualified Terminable Interest Property (QTIP) Trust: The QTIP trust makes use of the marital deduction but also may offer protection from the surviving spouse’s creditor claims. In this type of trust, the surviving spouse may use the income and principle from the trust during the spouse’s lifetime, but at the spouse’s death, the trust terminates and the property passes via the will of the first spouse who died.

Last update: Sept. 26, 2008