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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]OP, why do you think the widow is not inheriting all of the money? Did you Inlaws tell you otherwise?[/quote]

Because of estate taxes.   If she inherited everything her estate would have huge estate taxes to pay.   In order to avoid this a marital deduction trust is created calculating how much needs to be put in that trust to avoid the estate taxes.  The remainder is put in a family trust which goes directly to his beneficiaries. That trust is available  according to the trust terms.

There’s also a generation skipping trust so the estate isn’t taxed twice. When my husband’s mother dies some assets skip her two children and goes directly to the grandchildren to avoid estate tax.

My dh asked me to explain it, not sure why people who don’t know the answer just respond with rudeness.

[/quote]

There are no estate taxes on amounts inherited by a spouse.  [/quote]

That is true.  But there would be estate taxes when the surviving spouse died. That’s why there are marital deduction trusts which are commonly used.

The person gives his heirs assets that don’t go over the amount that would owe taxes.  The spouse gets the rest because there are no taxes between spouses.   The spouse already has enough money to last her lifetime.   [/quote]

No, that's not what marital deduction trusts did (they aren't used much anymore because of a change in the federal estate tax law).  The martial deduction trust is funded with the amount of the federal estate tax exemption for the first to die spouse (roughly $13M this year).  The trust's beneficiary is the spouse.  The purpose was to preserve the exemption of the first to die spouse when the couple didn't want to transfer that $13M to the next generation when the first spouse died.  If they didn't use a trust, then that amount would transfer directly to the surviving spouse and the estate tax exemption for the first spouse would essentially disappear.  Starting in 2010, you could elect to preserve the exemption when the first spouse died, which eliminated most of the need for these trusts.  They still only exist because of old estate plans or state estate tax laws that don't have portability.[/quote]

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