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For example, a decedent devised

the power, exercisable in favor of the

section 664 for descriptions of these

real property to his wife for life, with

surviving spouse or the estate of the

trusts.)

remainder to his children. The life

surviving spouse, to appoint the entire

Election To Deduct Qualified

interest that passed to the wife does

interest; (d) the power is exercisable by

Terminable Interests (QTIP)

not qualify for the marital deduction

the surviving spouse alone and

because it will terminate at her death

(whether exercisable by will or during

You may elect to claim a marital

and the children will thereafter possess

life) is exercisable by the surviving

deduction for qualified terminable

or enjoy the property.

spouse in all events; and (e) no part of

interest property or property interests.

the entire interest is subject to a power

However, if the decedent purchased

You make the QTIP election simply by

in any other person to appoint any part

a joint and survivor annuity for himself

listing the qualified terminable interest

to any person other than the surviving

and his wife who survived him, the

property on Schedule M and inserting

spouse (or the surviving spouse’s legal

value of the survivor’s annuity, to the

its value. You are presumed to have

representative or relative if the surviving

extent that it is included in the gross

made the QTIP election if you list the

spouse is disabled. See Revenue

estate, qualifies for the marital

property and insert its value on

Ruling 85-35, 1985-1 C.B. 328). If

deduction because even though the

Schedule M. If you make this election,

these five conditions are satisfied only

interest will terminate on the wife’s

the surviving spouse’s gross estate will

for a specific portion of the entire

death, no one else will possess or

include the value of the qualified

interest, see the section 2056(b)

enjoy any part of the property.

terminable interest property. See the

regulations to determine the amount of

instructions for Part 4 — General

The marital deduction is not allowed

the marital deduction.

Information, line 6, for more details.

for an interest that the decedent

The election is irrevocable.

Life insurance, endowment, or

directed the executor or a trustee to

annuity payments, with power of

convert, after death, into a terminable

If you file a Form 706 in which you

appointment in surviving spouse. A

interest for the surviving spouse. The

do not make this election, you may not

property interest consisting of the entire

marital deduction is not allowed for

file an amended return to make the

proceeds under a life insurance,

such an interest even if there was no

election unless you file the amended

endowment, or annuity contract is

interest in the property passing to

return on or before the due date for

treated as passing from the decedent to

another person and even if the

filing the original Form 706.

the surviving spouse, and will not be

terminable interest would otherwise

The effect of the election is that the

treated as a nondeductible terminable

have been deductible under the

property (interest) will be treated as

interest if: (a) the surviving spouse is

exceptions described below for life

passing to the surviving spouse and will

entitled to receive the proceeds in

estates, life insurance, and annuity

not be treated as a nondeductible

installments, or is entitled to interest on

payments with powers of appointment.

terminable interest. All of the other

them, with all amounts payable during

For more information, see Regulations

marital deduction requirements must

the life of the spouse, payable only to

sections 20.2056(b)-1(f) and

still be satisfied before you may make

the surviving spouse; (b) the installment

20.2056(b)-1(g), Example (7).

this election. For example, you may not

or interest payments are payable

If any property interest passing from

make this election for property or

annually, or more frequently, beginning

the decedent to the surviving spouse

property interests that are not included

not later than 13 months after the

may be paid or otherwise satisfied out

in the decedent’s gross estate.

decedent’s death; (c) the surviving

of any of a group of assets, the value of

Qualified terminable interest

spouse has the power, exercisable in

the property interest is, for the entry on

property. Qualified terminable interest

favor of the surviving spouse or of the

Schedule M, reduced by the value of

property is property (a) that passes

estate of the surviving spouse, to

any asset or assets that, if passing from

from the decedent, and (b) in which the

appoint all amounts payable under the

the decedent to the surviving spouse,

surviving spouse has a qualifying

contract; (d) the power is exercisable by

would be nondeductible terminable

income interest for life.

the surviving spouse alone and

interests. Examples of property

(whether exercisable by will or during

The surviving spouse has a

interests that may be paid or otherwise

life) is exercisable by the surviving

qualifying income interest for life if the

satisfied out of any of a group of assets

spouse in all events; and (e) no part of

surviving spouse is entitled to all of the

are a bequest of the residue of the

the amount payable under the contract

income from the property payable

decedent’s estate, or of a share of the

is subject to a power in any other

annually or at more frequent intervals,

residue, and a cash legacy payable out

person to appoint any part to any

or has a usufruct interest for life in the

of the general estate.

person other than the surviving spouse.

property, and during the surviving

Example. A decedent bequeathed

If these five conditions are satisfied

spouse’s lifetime no person has a

$100,000 to the surviving spouse. The

only for a specific portion of the

power to appoint any part of the

general estate includes a term for years

proceeds, see the section 2056(b)

property to any person other than the

(valued at $10,000 in determining the

regulations to determine the amount of

surviving spouse. An annuity is treated

value of the gross estate) in an office

the marital deduction.

as an income interest regardless of

building, which interest was retained by

whether the property from which the

Charitable remainder trusts. An

the decedent under a deed of the

annuity is payable can be separately

interest in a charitable remainder trust

building by gift to a son. Accordingly,

identified.

will not be treated as a nondeductible

the value of the specific bequest

terminable interest if:

Amendments to Regulations

entered on Schedule M is $90,000.

sections 20.2044-1, 20.2056(b)-7, and

1. The interest in the trust passes

Life estate with power of

20.2056(b)-10 clarify that an interest in

from the decedent to the surviving

appointment in the surviving

property is eligible for QTIP treatment if

spouse, and

spouse. A property interest, whether

the income interest is contingent upon

2. The surviving spouse is the only

or not in trust, will be treated as passing

the executor’s election even if that

beneficiary of the trust other than

to the surviving spouse, and will not be

portion of the property for which no

charitable organizations described in

treated as a nondeductible terminable

election is made will pass to or for the

section 170(c).

interest if: (a) the surviving spouse is

benefit of beneficiaries other than the

entitled for life to all of the income from

surviving spouse.

the entire interest; (b) the income is

A charitable remainder trust is either

payable annually or at more frequent

a charitable remainder annuity trust or a

The QTIP election may be made for

intervals; (c) the surviving spouse has

charitable remainder unitrust. (See

all or any part of qualified terminable

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Part Instructions

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2011 Page 28

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