Loans, mortgage

There is an unlimited marital deduction for decedents. The decisions on the use and amount of marital deduction will vary with the size of the estate and the unified tax credits, which increase each year up to 2010. The strategy for some persons will be to change the amount of the marital deduction during this period if the objective is to reduce estate taxes. The executor will often have to make computations to determine whether to elect to have certain qualified terminal interest properties qualify. Qualified terminal interest property means property that passes from the decedent, and in which the surviving spouse has a qualifying income interest for life. Disclaimers will likely be used more. (See post on disclaimers.)

The taxable estate is the gross estate less deductible:
• Funeral expenses.
• Estate administration expenses.
• Claims against the estate.
• Taxes accrued but unpaid at the date of death.
• Loss from fire, storm, and theft (casualty losses) not compensated for by the insurance or claimed as a deduction in an income tax return.
• An unlimited marital deduction is allowed for qualifying property that passes to a surviving spouse. The executor may even elect to have certain life interests qualify for the marital deduction. A special rule applies for charitable remainder trusts. See discussion below on marital deduction.
• The amount of transfers to charitable, religious, and similar institutions approved by IRS.
After the taxable estate is determined, the includible taxable gifts are added to the taxable estate before referring to the tax tables to determine the amount of the estate tax.