This allows the deductible gift to the surviving spouse to be made in trust so a trustee can manage the investments. The tax law provides that the gift, while not absolute, still qualifies for the marital deduction if the spouse must get all the income and has the power to say who gets the money remaining in the trust at his or her death. This is usually used together with a family or credit shelter trust which takes advantage of the credit to pass $3,500,000 tax free. Remember the spouse can get all the income from that trust too, but cannot have the power to say who gets the remaining assets of the family trust on his or her death. That power would cause the family trust assets to be in the surviving spouse’s taxable estate.

NOTE: There currently is no Federal or state estate tax or generation skipping tax. The gift tax is still in effect. Whether or not the estate and generation skipping taxes will be reinstated this year is not known. Many people expect that they will be reinstated, but what will happen is not known. What the rates and exemptions will be if the taxes are reinstated is also not known. Click here for more.

Contact Chicago estate tax lawyer Don Thompson for help with a marital deduction trust in Illinois.