Neil E Harl

The Role of the Marital Deduction in Planning Intergenerational Transfers

The marital deduction is an important and commonly used estate-planning tool. The optimal marital deduction should be chosen to minimize the present value of the tax outlays at the deaths of both the husband and wife given the expected growth rate, the appropriate discount rate, the expected time of death of the surviving spouse, the distribution of wealth between the spouses, and the total wealth of both spouses. The typical practice of claiming the maximum marital deduction allowed by law or the amount that just reduces the tax liability of the decedent to zero does not necessarily produce an optimal result.