The estate tax marital deduction—also known as the unlimited marital deduction or the marital deduction—allows one married spouse to transfer an unlimited amount of assets to the other spouse without incurring estate taxes on those assets. The marital deduction is calculated by subtracting the value of the assets passed on or transferred to the other spouse from the total value of the transferring spouse’s gross estate.

A transfer that qualifies for the marital deduction may be made while both spouses are alive or after the death of a spouse, as provided in the deceased spouse’s will.

In Vermont, the estate tax marital deduction aligns with federal law, allowing a surviving spouse to inherit an unlimited amount of assets from the deceased spouse without incurring estate taxes. This deduction applies to assets transferred at death as outlined in the deceased spouse's will, as well as to qualifying transfers made during the lifetime of the spouses. The value of the assets transferred to the surviving spouse is deducted from the gross estate of the deceased, potentially reducing the taxable estate to zero, provided the surviving spouse is a U.S. citizen. It's important to note that while the federal estate tax exemption amount is high, Vermont has its own estate tax with a lower exemption threshold. Therefore, estates exceeding the Vermont exemption amount may still be subject to state estate taxes, even after the marital deduction is applied. Consulting with an attorney can provide specific guidance on estate planning strategies to optimize tax benefits within Vermont's legal framework.