Future Business Leaders of America (FBLA) Agribusiness Practice Test

What benefit does the marital deduction provide in estate planning?

1. It reduces income tax for surviving spouses

2. Property left to a surviving spouse passes free of estate tax

3. It allows the deceased to keep their property

4. It increases estate value for tax purposes

The correct answer is: Property left to a surviving spouse passes free of estate tax

The marital deduction is a significant component of estate planning that benefits surviving spouses by allowing them to inherit property without incurring estate taxes at the time of the first spouse's death. This means that when one spouse passes away, the value of any property left to the surviving spouse is not subject to federal estate taxes, effectively allowing the entire value of that inherited property to pass on without being diminished by tax liabilities. This benefit is particularly important in facilitating the transfer of wealth within a family and ensuring that surviving spouses have access to the full financial resources of their deceased partner, which can be critical for their support. It also aids in the overall estate planning strategy by allowing couples to defer potential tax implications until the death of the second spouse, at which point the surviving spouse’s estate may have more manageable tax considerations. The other options, while related to financial and estate management, do not accurately capture the primary purpose and effect of the marital deduction.