How It Works
Anything you leave outright to your spouse passes tax-free at your death. Property left in certain qualifying trusts (such as a QTIP) also qualifies. The tax is not erased; it is simply deferred until the surviving spouse dies, at which point the federal estate tax exemption applies to whatever remains.
Non-Citizen Spouses
If the surviving spouse is not a U.S. citizen, the unlimited marital deduction does not apply. Couples in this situation typically use a Qualified Domestic Trust (QDOT) to defer the tax.
Marital Deduction vs. Bypass Trust
Pre-2010 plans often used a bypass trust to lock in both spouses' exemptions. Today, portability lets the surviving spouse claim the deceased spouse's unused exemption by filing IRS Form 706, which is often simpler than a mandatory bypass trust.
Arizona Spousal Protections
The marital deduction works alongside Arizona's family protection statutes such as A.R.S. 14-2401 at the first death.