Husband is not a U.S. citizen but is a resident alien. Wife is a naturalized citizen. Husband dies leaving everything to his wife outright. How much of a marital deduction will his estate have?

Husband is not a U.S. citizen but is a resident alien. Wife is a naturalized citizen. Husband dies leaving everything to his wife outright. How much of a marital deduction will his estate have?

• A. 100 percent
• B. 0 percent because the property must be in qualified domestic trust.
• C. 0 percent because non-U.S. not entitled to marital deductions.
• D. 0 percent because the property must be in a qualified terminable interest property (QTIP) trust.

Answer: (A)

The important idea is that transfers to a surviving spouse can be fully sheltered from estate tax when the spouse is a U.S. citizen. In this situation, the wife is a naturalized U.S. citizen, so the decedent’s estate can pass all assets to her tax-free under the unlimited marital deduction. The fact that the husband wasn’t a citizen at death doesn’t matter for the deduction because the recipient is a citizen. A trust arrangement like a Qualified Domestic Trust would only be needed if the surviving spouse were not a U.S. citizen. Since she is, the entire estate qualifies for the marital deduction, effectively making it 100 percent.

The important idea is that transfers to a surviving spouse can be fully sheltered from estate tax when the spouse is a U.S. citizen. In this situation, the wife is a naturalized U.S. citizen, so the decedent’s estate can pass all assets to her tax-free under the unlimited marital deduction. The fact that the husband wasn’t a citizen at death doesn’t matter for the deduction because the recipient is a citizen. A trust arrangement like a Qualified Domestic Trust would only be needed if the surviving spouse were not a U.S. citizen. Since she is, the entire estate qualifies for the marital deduction, effectively making it 100 percent.