Homer and Laura are husband and wife.At the time of Homer's prior death in 2009,they owned the following: land as tenants by the entirety worth $2,000,000 (purchased by Homer)and stock as equal tenants in common worth $3,000,000 (purchased by Laura).Laura also owns an insurance policy on Homer's life (maturity value of $1,000,000)with herself as the designated beneficiary.Homer's will passes all his property to Laura.How much marital deduction is allowed Homer's estate?

Question

Quizplus · Accepted Answer

The marital deduction is allowed for the value of property passed from one spouse to another (usually the surviving spouse) without incurring any federal estate tax. In this case, since all of Homer's property passes to Laura, the entire value of his property is eligible for the marital deduction. Therefore, the amount of marital deduction is $2,000,000 (value of land) + $3,000,000 (half of the stock that he owned) = $5,000,000. However, since the $1,000,000 life insurance policy on Homer's life passes outside of his estate and directly to Laura as the designated beneficiary, it is not subject to estate tax and is not included in the calculation of the marital deduction. Therefore, the correct answer is $2,500,000 (without the insurance policy).

Homer and Laura Are Husband and Wife