Understanding Estate Taxes
8. Leaving everything to your spouse (B)
Sue's estate of $4 million will be entitled to claim her $2 million exemption. But the estate tax bill on the remaining $2 million is a whopping $900,000!
The problem with leaving everything to your spouse is that you waste the estate tax exemption of the spouse who dies first.
You see, under current tax law, everyone is entitled to an estate tax exemption. But when Bob left everything to Sue, he wasted his.
If they had planned ahead, they could have used both their exemptions and saved $900,000 in estate taxes.