What is a marital deduction trust?
A marital deduction trust is a type of trust created to fund an inheritance for a surviving spouse while minimizing estate taxes. This type of trust is commonly used in Alaska inheritance law due to the state’s unique circumstances. Marital deduction trusts are irrevocable trusts created to provide income for a surviving spouse during their lifetime. The trust fund can be used to provide a spouse with an income via monthly payments or, if the trust is a “qualified terminable interest property” (QTIP) trust, proceeds from its sale can be used to provide an income as well. In Alaska, the assets in the trust are not taxable in the surviving spouse’s estate, as long as the trust meets specific criteria: that the trust was set up to benefit the surviving spouse exclusively, and that the trust is irrevocable. This tax savings allows the spouse to be provided with income for life, while not having to pay any estate taxes on money received from the trust. Marital deduction trusts are commonly used in Alaska to provide spouses with income during their lifetime, without having to worry about estate taxes. This type of trust also allows the original donor to retain some control over the assets and dictates what happens to them after the surviving spouse dies.
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