Chapter 14 - The Marital Deduction

Question 1

Marital Deduction Requirements

Answer 1

• Marital status exists
• surviving spouse must be a U.S. citizen
• Property in decedent spouse’s gross estate
• Property must pass to surviving spouse

Question 2

Terminal Interest Rule

Answer 2

Section 2056(b) provides that no marital deduction is allowed with respect to certain property interests, referred to generally as “terminable interests”, passing from a decedent to his surviving spouse. … Life estates, terms for years, annuities, patents, and copyrights are therefore terminable interests.

Question 3

QTIP Trust

Answer 3

A qualified terminable interest property (QTIP) trust allows an individual, called the grantor, to leave assets for a surviving spouse and also determine how the trust’s assets are split up after the surviving spouse dies. (Life Estate)

Question 4

Is a QTIP Trust taxable at the first spouse’s passing or second spouse’s?

Answer 4

With a QTIP, estate tax is not assessed at the point of the first spouse’s death, but is instead determined after the second spouse has passed.

Question 5

DSUE (Deceased Spouse Unused exclusion) Amount

Answer 5

Can transfer a spouses unused exemption amount, must be elected within 9 months of the spouse passing.

Question 6

A QTIP Trust has protection against creditors of survivor’s estate?

Answer 6

True

Question 7

A QTIP is non-probatabe?

Answer 7

True

Question 8

If the decedent directs the executor or trustee to purchase terminable-interest property with a money bequest for the benefit of the spouse, the property will not qualify for the marital deduction?

Answer 8

True

Question 9

Both the decedent and the surviving spouse must be citizens of the United States for transfers to such survivor to qualify for a marital deduction?

Answer 9

False

The marital-deduction rules require that the surviving spouse (not the decedent) be a United States citizen.

Question 10

A bequest of a life estate can qualify for a marital deduction if it is coupled with a general power of appointment?

Answer 10

True

Question 11

An estate must subtract the basic credit amount before allowing the marital deduction?

Answer 11

False

The marital deduction comes into play well before the basic credit amount is subtracted

Question 12

he goal of the unlimited estate tax marital deduction is to treat the spouses as one unit for transfer tax purposes and to ultimately subject the property to transfer tax in one estate?

Answer 12

True

Question 13

The marital deduction will be reduced if taxes are payable out of the marital share of the estate?

Answer 13

True

Question 14

The estate tax marital deduction is allowed on the full gross estate tax value of the property left to the spouse, regardless of whether taxes, mortgages, or administration expenses are payable out of the marital interest?

Answer 14

False
The estate tax marital deduction is allowed on the net value of the marital interest passing to the surviving spouse, which means the gross value of the property interest passing less taxes, mortgages, or administration.

Question 15

Most authorities believe that unproductive real estate and/or closely held stock (not paying dividends) will satisfy the all-income-at-least-annually requirement for a QTIP?

Answer 15

False
On the contrary, most authorities believe the investments in a QTIP trust should be income producing to qualify as a QTIP.

Question 16

To my spouse unless he remarries,” is an example of a terminable interest that would still qualify for the unlimited marital deduction?

Answer 16

False

A terminable interest, outside of the QTIP trust, would not qualify for the marital deduction.

Question 17

Only probate property qualifies for the marital deduction?

Answer 17

False
Probate property is only one type of property that can qualify for the marital deduction if left to the surviving spouse.

Question 18

The term QTIP, or qualified terminable interest property, refers to property that pays income at least annually to the surviving spouse, but at the surviving spouse’s death, the principal passes to a person or persons other than the surviving spouse’s estate?

Answer 18

True

Question 19

A credit-exclusion (equivalent) bypass trust (CEBT) is another name for the marital trust

Answer 19

False
A credit exclusion (equivalent) bypass trust is a nonmarital (family) trust, providing the surviving spouse with income and only limited amounts of principal. A marital trust provides income plus a general power to appoint principal to the survivor’s estate or creditors.

Question 20

The marital deduction is not allowed if a married couple is separated but not divorced at the time of the first spouse’s death?

Answer 20

False
If the decedent dies while legally married, all qualifying property left to a surviving spouse will qualify for the marital deduction.

Question 21

An example of a terminable interest is a will provision leaving a life estate to a surviving spouse with the property then passing in equal shares to the decedent’s children?

Answer 21

True

Question 22

When property is placed in a power-of-appointment marital trust, there is an obligation to make the property income producing?

Answer 22

True