What is a marital deduction trust?
A marital deduction trust is a type of trust used in California estate planning that allows an individual to transfer a portion of their assets to their spouse, free from estate tax, while still receiving a tax deduction. This type of trust, which is created in the form of a legal contract, is most commonly utilized by married couples. The primary benefit of a marital deduction trust is that, when properly established, it allows an individual to transfer assets to their spouse without incurring any estate tax liability. Additionally, the assets placed within the trust can still receive a tax deduction for the individual when the assets are transferred. By utilizing a marital deduction trust, couples are able to reduce their estate tax liability, leaving more assets for their beneficiaries to enjoy. The individual transferring the assets to their spouse is referred to as the grantor, while the spouse who is the recipient of the assets is known as the beneficiary. The grantor will name the trustee of the trust, typically either themselves or their attorney, who then manages the trust and the assets within it. Marital deduction trusts are an important estate planning tool for married couples in California and can provide significant tax savings. It is, however, important for couples to understand the legal requirements of this type of trust to ensure that the assets are being properly transferred and the estate tax liability is being minimized.
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