If the husband dies first, and he gives all his property to his wife, then under a special rule called the marital deduction, there will be no estate tax upon his death. This is true even if the estate is above $3,500,000 (in 2009). For example if a husband and wife jointly own more than $7,000,000, and the husband dies. Husband is allowed $3,500,000 exemption (in 2009) for his one half of community property. Under the marital deduction, if the husband's property over $3,500,000 exemption (in 2009) passes to the surviving wife, then there is no estate tax.

However, when the surviving wife thereafter dies, there will be death taxes. If the wife's estate is over $3,500,000 (in 2009), death taxes must be paid. If the wife's estate is $4,000,000 the death taxes will be about $225,000. Nevertheless, death taxes can be avoided or reduced in this case with proper estate planning. (see discussion on Estate Planning Trust)

The same marital deduction rules apply if the wife dies first.