Credit Shelter Bequests

While the marital deduction under the estate and gift tax excludes from your federal taxable estate only the value of property transferred to your spouse, the "unified credit" (now called the "applicable credit amount") serves to exclude from estate taxation lifetime gifts and transfers at death of up to $5 million ($5.25 million, as adjusted for inflation, for those dying in 2013). This exclusion from estate taxation applies regardless of who receives the gifts and transfers. Also, after 2010, a surviving spouse may be able to take advantage of the unused portion of the estate tax exclusion of a deceased spouse, thus increasing the available exclusion.

Especially if the value of your estate is greater than the applicable exclusion amount, you can take advantage of the unified credit to transfer some of your assets to persons other than your spouse, because, if you give everything to your spouse, he or she will not be able to use the marital deduction to exclude any amount from his or her federal taxable estate after your death.