Are Marital Deductions Still Unlimited?

Yes — but only if both spouses are U.S. citizens (or certain trust requirements are met).

In the United States, spouses can generally transfer assets to each other at death with no federal estate tax due at the first death because of the Unlimited Marital Deduction. This rule allows married couples to defer federal estate tax until the death of the surviving spouse.

Of course, each state has its own estate or inheritance tax rules, which may apply regardless of the federal marital deduction.

What May Change in 2026

Under current law, the federal estate and gift tax exemption is scheduled to change on January 1, 2026. Without new legislation, the exemption would be significantly reduced.

Several proposals currently under discussion in Congress would extend or increase the exemption amount beginning in 2026. If enacted, these proposals could result in:

• A federal estate and gift tax exemption of up to $15 million per individual, and
• A combined exemption of up to $30 million for married couples, if portability is properly elected and preserved.

Important: These higher exemption amounts are not yet law and will depend on Congressional action. Estate planning decisions should be made with flexibility to account for possible legislative changes.

Regardless of future exemption levels, most married couples will continue to avoid federal estate tax at the first death due to the unlimited marital deduction.

Requirements for the Unlimited Marital Deduction (2025)

The rules governing the unlimited marital deduction remain unchanged in 2025:

• The individuals must be legally married under the laws of a U.S. state or jurisdiction.
• The surviving spouse must be a U.S. citizen in order to receive an unlimited transfer at death.
• A Green Card holder (lawful permanent resident) is not treated as a U.S. citizen for marital deduction purposes.

If the Surviving Spouse Is Not a U.S. Citizen

If the surviving spouse is not a U.S. citizen, the unlimited marital deduction generally does not apply. Instead:

• Transfers at death to a non-citizen spouse are subject to estate tax unless assets are placed into a Qualified Domestic Trust (QDOT).
• A QDOT allows marital-deduction-like tax deferral, provided the trust meets specific IRS requirements and the election is made on a timely filed Form 706.

For lifetime gifts, a special annual exclusion applies for gifts to a non-citizen spouse. In 2025, that exclusion is $190,000, adjusted annually for inflation.

Without proper advance planning, couples with a non-citizen spouse may face significant federal estate tax exposure. Trust structures such as QDOTs and QTIP trusts can be used to preserve tax deferral and provide for the surviving spouse, but they must be carefully structured and administered to be effective.

Why These Rules Exist

The unlimited marital deduction is based on the assumption that the surviving spouse remains subject to U.S. tax reporting and estate taxation at their own death.

When the surviving spouse is not a U.S. citizen, Congress has determined that there is a risk assets could leave the United States, making enforcement of U.S. estate tax laws more difficult. A QDOT helps ensure that assets remain within the reach of U.S. taxing authorities.

Additional Considerations

• The United States has entered into multiple estate and gift tax treaties, primarily with European countries. These treaties may reduce or modify tax exposure for non-U.S. citizen spouses, but they are complex and often require specialized planning.
• A non-citizen spouse’s long-term U.S. residency, tax payment history, or Green Card status does not change the analysis. For marital deduction purposes, an individual is either a U.S. citizen or not.
• If a non-citizen spouse dies first while domiciled in the United States, the surviving U.S. citizen spouse can generally inherit without federal estate tax. However, the non-citizen spouse’s home country may impose its own inheritance or estate taxes.
• California and Arizona continue to impose no state-level estate or inheritance tax, though several other states do. State law should always be reviewed as part of any estate plan.

Conclusion & How We Can Help

For married couples where both spouses are U.S. citizens, the United States continues to offer one of the most favorable estate tax systems in the world. The Unlimited Marital Deduction, combined with a historically high 2025 federal exemption of $13.99 million per person, allows substantial wealth to pass free of federal estate tax at the first spouse’s death.

At Tritch Buonocore Law, we don’t just help you navigate estate planning, asset protection, and trusts — we give you the peace of mind that comes from understanding your options. Our goal is to simplify the entire process and make it as seamless and stress-free as possible, so you can focus on enjoying your spouse, family, and adventures ahead.

We offer a 30-minute meet-and-greet consultation for new clients. We are here to help — call (480) 525-6244, email us, or visit our website for more information.