Making Provisions for the Surviving Spouse
When making an estate plan, a married couple must determine how to allocate the deceased spouse's property if the other spouse survives. The deceased spouse's property is defined to include one-half of the marital assets and all the deceased spouse's separate assets. Although other techniques exist, these four generally satisfy the planning needs for any married couple:
1. Outright to Spouse
The "Outright to Spouse" option indicates that both spouses have little or no concern about the surviving spouse possibly changing the estate plan to exclude the deceased spouse's preferred beneficiaries. Instead, both spouses agree to give the surviving spouse full discretion to administer and distribute the deceased spouse's property as the surviving spouse sees fit. Under this approach the surviving spouse may, in theory, choose to remarry and then give all assets to his or her new spouse instead of the currently agreed-upon beneficiaries. Likewise, the surviving spouse might keep the agreed-upon beneficiaries but reallocate the inheritance in a manner the deceased spouse would not have approved. But the higher priorities with this option are to maintain a simple estate plan and to meet the needs of the surviving spouse.
2. Establish Decedent's Trust
The "Establish Decedent's Trust" option indicates that at least one spouse harbors a measurable concern that the surviving spouse might change the estate plan to exclude the deceased spouse's preferred beneficiaries. By allocating the deceased spouse's property to a separate irrevocable trust for the benefit of the surviving spouse (aka "Decedent's Trust"), the estate plan can restrict the surviving spouse's ability to disrupt the agreed-upon plan for allocation and distribution of inheritance. The levels and types of restrictions are customizable depending on the level of concern, but the general idea with this approach is to ensure the surviving spouse preserves the estate plan both spouses agreed to.
3. Elect Portability of Unused Exclusion Amount on Form 706
The "Elect Portability" option indicates a concern regarding the potential impact of estate taxes after the death of the surviving spouse. Although the current exclusion amount from the federal estate tax is approximately $14 million, this number is subject to the political winds of change and may decrease to approximately $8 million in 2026 (unless Congress extends the 2017 tax act). But if a married couple has substantial assets that are likely to appreciate high enough to trigger estate taxes after the death of the surviving spouse, their estate plan may integrate a provision directing the surviving spouse to make the "portability" election on tax form 706 after the death of the first spouse to die. This means that any unused exclusion amount at the deceased spouse’s death is added to the surviving spouse’s exclusion amount at the surviving spouse’s death. For example, if Husband’s estate is $2 million at a time when the exclusion amount is $14 million, then Wife’s exclusion amount at the time of her death will be augmented by the $12 million unused exclusion amount from Husband’s estate. This relatively simple technique has the potential to substantially reduce or eliminate the estate taxes due when the surviving spouse dies, even if the surviving spouse’s net worth increases to a much higher number.
4. Use Clayton QTIP Election
The "Use Clayton QTIP Election" option also indicates a concern regarding the potential impact of estate taxes after the death of the surviving spouse, but it pairs with a Decedent's Trust. Used primarily by high net worth married couples, this option integrates a provision in the estate plan that permits the surviving spouse to make a "Clayton QTIP" election on tax form 706. This means that any property exceeding the deceased spouse's exclusion amount can be allocated to a second irrevocable trust (aka "QTIP trust") that qualifies for the unlimited marital deduction. The Clayton QTIP election eliminates the possibility of having to pay estate taxes immediately after the death of the first spouse to die, while simultaneously imposing restrictive provisions on the surviving spouse that are similar to the restrictions imposed by the Decedent's Trust. The assets of the Decedent's Trust, including appreciation, are fully excluded from estate taxes after the death of each spouse, but the assets of the QTIP trust remain subject to estate taxes after the death of the surviving spouse.
About the Author
Thomas J. Bouman provides legal counsel in the areas of estate planning, estate administration, and asset protection. He brings a highly systematic approach to the practice of law, which is critically important when wading through the complex, and often bizarre, legal requirements associated with estate and trust law. Mr. Bouman is the author of the Arizona Estate Administration Answer Book and a prominent member of WealthCounsel, the nation’s premiere organization of estate planning attorneys.
- Outright to Spouse
- Outright to Spouse + Elect Portability of Unused Exclusion Amount on Form 706
- Establish Decedent’s Trust for Spouse
- Establish Decedent’s Trust for Spouse + Use Clayton QTIP Election
1. Outright to Spouse
The "Outright to Spouse" option indicates that both spouses have little or no concern about the surviving spouse possibly changing the estate plan to exclude the deceased spouse's preferred beneficiaries. Instead, both spouses agree to give the surviving spouse full discretion to administer and distribute the deceased spouse's property as the surviving spouse sees fit. Under this approach the surviving spouse may, in theory, choose to remarry and then give all assets to his or her new spouse instead of the currently agreed-upon beneficiaries. Likewise, the surviving spouse might keep the agreed-upon beneficiaries but reallocate the inheritance in a manner the deceased spouse would not have approved. But the higher priorities with this option are to maintain a simple estate plan and to meet the needs of the surviving spouse.
2. Establish Decedent's Trust
The "Establish Decedent's Trust" option indicates that at least one spouse harbors a measurable concern that the surviving spouse might change the estate plan to exclude the deceased spouse's preferred beneficiaries. By allocating the deceased spouse's property to a separate irrevocable trust for the benefit of the surviving spouse (aka "Decedent's Trust"), the estate plan can restrict the surviving spouse's ability to disrupt the agreed-upon plan for allocation and distribution of inheritance. The levels and types of restrictions are customizable depending on the level of concern, but the general idea with this approach is to ensure the surviving spouse preserves the estate plan both spouses agreed to.
3. Elect Portability of Unused Exclusion Amount on Form 706
The "Elect Portability" option indicates a concern regarding the potential impact of estate taxes after the death of the surviving spouse. Although the current exclusion amount from the federal estate tax is approximately $14 million, this number is subject to the political winds of change and may decrease to approximately $8 million in 2026 (unless Congress extends the 2017 tax act). But if a married couple has substantial assets that are likely to appreciate high enough to trigger estate taxes after the death of the surviving spouse, their estate plan may integrate a provision directing the surviving spouse to make the "portability" election on tax form 706 after the death of the first spouse to die. This means that any unused exclusion amount at the deceased spouse’s death is added to the surviving spouse’s exclusion amount at the surviving spouse’s death. For example, if Husband’s estate is $2 million at a time when the exclusion amount is $14 million, then Wife’s exclusion amount at the time of her death will be augmented by the $12 million unused exclusion amount from Husband’s estate. This relatively simple technique has the potential to substantially reduce or eliminate the estate taxes due when the surviving spouse dies, even if the surviving spouse’s net worth increases to a much higher number.
4. Use Clayton QTIP Election
The "Use Clayton QTIP Election" option also indicates a concern regarding the potential impact of estate taxes after the death of the surviving spouse, but it pairs with a Decedent's Trust. Used primarily by high net worth married couples, this option integrates a provision in the estate plan that permits the surviving spouse to make a "Clayton QTIP" election on tax form 706. This means that any property exceeding the deceased spouse's exclusion amount can be allocated to a second irrevocable trust (aka "QTIP trust") that qualifies for the unlimited marital deduction. The Clayton QTIP election eliminates the possibility of having to pay estate taxes immediately after the death of the first spouse to die, while simultaneously imposing restrictive provisions on the surviving spouse that are similar to the restrictions imposed by the Decedent's Trust. The assets of the Decedent's Trust, including appreciation, are fully excluded from estate taxes after the death of each spouse, but the assets of the QTIP trust remain subject to estate taxes after the death of the surviving spouse.
About the Author
Thomas J. Bouman provides legal counsel in the areas of estate planning, estate administration, and asset protection. He brings a highly systematic approach to the practice of law, which is critically important when wading through the complex, and often bizarre, legal requirements associated with estate and trust law. Mr. Bouman is the author of the Arizona Estate Administration Answer Book and a prominent member of WealthCounsel, the nation’s premiere organization of estate planning attorneys.