What is the “Unlimited Marital Deduction?”

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The federal unlimited marital deduction allows an individual to leave unlimited amounts of assets, free of federal estate tax, to his or her surviving spouse (as long as the surviving spouse is a U.S. citizen). This is accomplished through an unlimited deduction from estate and gift tax that postpones the tax on assets inherited from each other until the second spouse dies. Likewise, most state exempt transfers to a surviving spouse from state death tax.

A special provision called “portability” was made permanent in the 2013 tax law changes. This allows the person administering the estate of a deceased spouse to allocate any unused exemption amounts to the surviving spouse, thereby enabling the surviving spouse to transfer up to $10 .86 million (2015) to their beneficiaries tax-free.

To accomplish this, the administrator must file a federal estate tax return within 9 months of the death of the first spouse, even if no tax is owed. If the return is not filed, or the deadline (including a possible 6-month extension) is missed, the surviving spouse loses the right to portability.