Another exception to the second exception is a gift which qualifies for the gift tax marital deduction (see Q 919).
(1)To the extent allowable by the law (governing the administration of decedents' estates) under which the estate is being administered, (a) funeral expenses, (b) administration expenses, (c) claims against the estate, and (d) unpaid mortgages on or other indebtedness against property included at its full value in the gross estate; (2) casualty and theft losses incurred during settlement of the estate and not compensated for by insurance or otherwise; (3) bequests to charitable organizations (and state taxes paid on charitable bequests) (Q 864); (4) the marital deduction (Q 863); (5) the qualified family-owned business interest deduction (Q 865); and (6) state death taxes.
What is the estate tax marital deduction and what is the limitation on the deductible amount?
The marital deduction is a deduction allowed from the gross estate for interests in property which pass from the decedent to his (or her) surviving spouse and which are included in determining the value of the gross estate, and limited only by the value of such interests.
Similarly, in PLR 9104003, the decedent provided that a bequest to the surviving spouse was intended to qualify for the Federal estate tax marital deduction (to the extent elected by the executor) and "the terms of this will shall be construed in accordance with such intent." Citing Procter once more, the IRS ruled that this spouse's entire interest in the marital trust was subject to a power in the executors to appoint the corpus to someone other than the surviving spouse, and that this savings clause was ineffective in altering that result.
288, the IRS permitted a marital deduction even though the settlement agreement with the surviving spouse conditioned payment upon a favorable determination that the transfer would qualify for the marital deduction.
372, a provision in a decedent's will stated that any power, duty, or discretionary authority granted to the fiduciary would be void to the extent that either the exercise or right to exercise thereof would cause the estate to lose any part of the marital deduction. The IRS construed the clause as an aid in determining the testator's intent rather than a savings clause and allowed the estate to claim a marital deduction.
Similarly, in PLR 7916006, where the fiduciary powers in the decedent's will were not exercisable if their exercise would defeat the marital deduction, the IRS permitted the savings clause to be effective to illustrate the testator's intent and preserved the marital deduction.
Lump Sum To Spouse: Life insurance will qualify for the federal estate tax marital deduction if payable in a lump sum to the decedent-insured's surviving (U.S.
Income To Spouse, Balance To Spouse's Estate: A marital deduction will be allowed if the insured or the surviving spouse selects a settlement option with the insurer giving the surviving spouse income from the proceeds for her life with the balance of the proceeds going to her estate.
Under this exception, "income only" payments to the spouse with payments to a beneficiary following the termination of her interest can qualify for a marital deduction even if the surviving spouse is given no general power of appointment.
QTIP rules require that the proceeds "pass from the decedent," that the surviving spouse be given a "qualifying income interest for life," and that the original decedent's executor make an irrevocable election on the federal estate tax return to have the marital deduction apply.