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.
Generally, proceeds will qualify for the federal estate tax marital deduction if they are paid in the form of a:
Payment of proceeds to trust which itself qualifies for 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.
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.
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.
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.
Absent a holding that the savings clause was valid, the estate would have been denied a marital deduction because the trustee's powers included a power which, if not invalidated, would have served to disqualify the marital trust.
Absent the validity of the savings clause, the estate would have been denied a marital deduction because the fiduciary was permitted to invest in insurance, an unproductive property.