Marital Deduction

The law allows an unlimited deduction of assets passing from one spouse to another both during lifetime and at death. This means that the assets not used for the generation-skipping transfer or estate taxes will pass to the surviving spouse and qualify for the marital deduction (the federal estate taxes deferred on these amounts). In other words, the first spouse to die could conceivably leave the entire estate to the surviving spouse and pay no federal estate tax. Since these assets become part of the surviving spouse's estate, that spouse will pay estate taxes on the assets unless they are disposed of before death. The surviving spouse has full control of the funds, the income, and how to distribute the remaining assets at death.