Does anyone know how spousal exemption works? I only know it allows tax-free transfer of estates between spouses. I don’t know how the estate can be transferred immediately to children tax free ?
Yes, only if it’s a one time (not-so-big) amount. Like say 50K transferred to children tax free if you have a windfall of 5million.
Thanks. Do you mean that under spousal exemption… If Decedent leave $5M => Wife can receive $4.5M tax free => Children can receive $0.5M tax free immediately.
sorry, typo. If Decedent leave $5M => Wife can receive $4.95M tax free => Children can receive $0.05M tax free immediately. Is that correct?
unlimited exemptions only exist for spouses. in places like the UK there is exemption for small estates < 312,000 pounds that can be transfered without estate taxes to the heirs (can be the children). This amount is per spouse, so if one spouse dies, 312,000 can be transfered to the kids and another 312,000 transfered when the other spouse dies, for a total of 724,000 when both parents die.
Thanks! It guess this is why the textbook say it is often advisable to take adv of first exclusion when the first spouse dies by transferring the exclusion amt to someone other than the spouse.