Marital Deductions - Requirements & Qualifying Transfers

Requirements
To qualify for the marital deduction in the United States, several requirements must be met which include:

1) The decedent must be legally married at the time of their death.

2) The person to whom the decedent is legally married to at the time of their death must survive the decedent. A bequest that is conditioned upon the spouse surviving up to six months after the first spouse's death will qualify for the marital deduction. But, if the bequest is contingent upon a condition that may not be determined within that six-month period, the marital deduction will not be available

3) The surviving spouse must be a U.S. citizen ((or the property must be held in a qualifying domestic trust (QDOT), see below). The surviving spouse must be or become a U.S. citizen by the time the decedent's federal estate tax return is filed. A non-citizen spouse who is in the process of obtaining citizenship must also be a U.S. resident at all times after the decedent's death and before citizenship is granted. If the surviving spouse decides to become a U.S. citizen, a representative of the decedent's estate should request an extension of time to file the federal estate tax return, because the citizenship process will take more than nine months in most instances. In the absence of citizenship, the marital deduction is allowed only for property placed in a QDOT before the estate tax return is filed and for property governed by an applicable tax treaty.

4) The interest passing to the surviving spouse must be includable in the decedent's U.S. gross estate. An interest is nondeductible to the extent that it is not includable in the decedent's gross estate. A marital deduction will not be allowed for property that is otherwise deductible as an expense, claim or loss. No double deduction is permitted.

5) The interest must "pass" to the surviving spouse. The IRC defines "passing" to include interests acquired by the surviving spouse by will, intestate succession, curtesy[SA1] , statutory share, right of survivorship, the exercise or default of exercise of a power of appointment or pursuant to a life insurance beneficiary designation.

6) The interest received by the surviving spouse must be a deductible interest. An interest passing to a decedent's surviving spouse is a "deductible interest" if it does not fall within one of the following categories of "nondeductible interests:" (a) a property interest not included in the decedent's gross estate, (b) an interest deducted under IRC section 2053 (relating to deductions for expenses and indebtedness), (c) a casualty loss or (d) a terminable interest.

7) The value of the interest passing to the surviving spouse must be at its "net value."

Qualifying Transfers
Three common methods of leaving property to a spouse and qualifying for the marital deductions include:

In summary, any property left with no strings attached is an absolute interest and qualifies for the marital deduction.

Terminable Interest Rule and Exceptions


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