There is an unlimited marital estate tax deduction. If you are a United States citizen and you are married to another citizen (and that marriage is recognized by the federal government) you can leave any amount of money to your spouse free of the estate tax.
When it comes to everyone else there is a $5.25 million exclusion. You can only give a total of $5.25 million to the other people on your inheritance list before the estate tax would be applicable. At the current time the top rate of the estate tax is 40%.
In spite of the above there are ways that you can position your assets to minimize your estate tax exposure even if your assets do in fact exceed $5.25 million in total value. This is something to discuss with an estate planning lawyer.
But what about an American citizen who is married to someone who is not a citizen? While you cannot use the unlimited marital deduction if you’re in this situation you could go another route to provide for your spouse without incurring any estate tax liability.
To achieve this you could create and fund a qualified domestic trust. Under the tax code the spouse that you leave behind could be the beneficiary of the trust, and he or she could receive distributions from the trust free of the estate tax.
However, these distributions cannot come from the principal; the distributions must be comprised of the trust’s earnings. If any part of the principal is distributed by the trustee the estate tax would be applicable unless certain qualified circumstances made these distributions necessary.