Taxation of Estates and Gifts
Deceased Spousal Unused Exclusion Amount
So, the exclusion amount is currently about $22,000,000 per couple. It is currently fully portable and it does not matter how it is planned.
Planning under a non-portability regime
Since the non-portability rule is still used and may be returned to, it is still important to learn.
In order to maximize each spouse's applicable exclusion amount, the amount of the first spouse to die's applicable exclusion amount (~$11,000,000) is placed in a trust that does not qualify for the marital deduction.
This "bypass trust" fully exhausts the decedent's applicable exclusion amount, but is not included in the surviving spouse's estate because it only gives the right to all income from the trust and the power of appointment for her "health, education, support, or maintenance." (I.e., not a general power of appointment)
Any remaining property is given directly to the surviving spouse or to a trust that does qualify for the marital deduction. This "pecuniary marital bequest" will then use up the surviving spouse's applicable exclusion amount when she dies.
- The way this is drafted is with a pecuniary marital bequest formula provision.