Marital deduction is a key federal estate and gift tax concept that allows unlimited transfers between U.S. citizen spouses during life or at death without immediate transfer tax, as long as certain requirements are met. Property passing outright to a surviving spouse or to qualifying marital trusts generally qualifies for the unlimited marital deduction, deferring estate tax until the surviving spouse's death. The deduction supports planning strategies that provide financially for a surviving spouse while potentially preserving exemption amounts for other beneficiaries through credit shelter or bypass trusts.

In real world estate planning, advisors encounter the marital deduction when structuring wills, revocable trusts, and beneficiary designations for married clients. Attorneys design plans that balance use of the marital deduction with use of each spouse's applicable exclusion amount, often combining marital bequests or trusts with credit shelter provisions. Life insurance frequently supports marital deduction planning by providing liquidity at the first or second death, funding trusts, or equalizing inheritances when certain assets pass directly to a spouse. Advisors help clients understand that while the marital deduction can defer tax, it does not eliminate it; assets remaining at the surviving spouse's death may still face estate tax unless sheltered by exemptions or additional strategies. By understanding marital deduction rules, producers can coordinate life insurance ownership, beneficiary designations, and trust structures with legal plans to support both spousal security and long term wealth transfer goals.