3647. Is a marital deduction available for the value of a survivor benefit payable under an individual retirement plan that is includable in the decedent’s gross estate?Nuco Employeercline202014-06-03T20:40:00Z2014-06-03T20:40:00Z46173520Albany Law School298412914Site Map/Individual Retirement Plans/Estate TaxationSite Map/Transfer Taxation/Federal Estate Taxation/Individual Retirement Plansindividual retirement account2005-01-24T00:00:00ZTaxFactsDefaultArticle118020649-00-tf1.xml649.00;#1788;#2310;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1Is a marital deduction available for the value of a survivor benefit payable under an individual retirement plan (IRA) that is includable in the decedent’s gross estate?71200.0000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-14T23:37:46Z3647. Is a marital deduction available for the value of a survivor benefit payable under an individual retirement plan that is includable in the decedent’s gross estate?Yes, if benefits pass to the surviving spouse in a form that qualifies for the marital deduction.IRC Sec. 2056. Thus, an outright transfer of the IRA account balance to the surviving spouse should qualify for the marital deduction. A marital deduction also should be available if all income from the IRA is distributed at least annually to the surviving spouse and the surviving spouse is given a general power to appoint the IRA to himself or herself or to his or her estate.IRC Sec. 2056(b)(5). Additionally, a marital deduction should be available if all income from the IRA is distributed at least annually to the surviving spouse, no one has the power to distribute any part of the IRA to anyone other than the surviving spouse, and the executor makes a qualified terminable interest property (“QTIP”) election.IRC Sec. 2056(b)(7). If the surviving spouse is given a survivor annuity where only the spouse has the right to receive payments during such spouse’s lifetime, such interest would qualify for the QTIP marital deduction.IRC Sec. 2056(b)(7)(C). In the case of a surviving spouse who is not a U.S. citizen, a qualified domestic trust generally would be required to obtain the marital deduction.IRC Secs. 2056(d), 2056A; Let. Ruls. 9544038, 9322005.Planning Point: All of the QTIP trust income must be received by the surviving spouse for life. Such income is sometimes defined by state law as unitrust interest.An executor can elect to treat an IRA and a trust as QTIP if the trust is the beneficiary of the IRA, the surviving spouse can compel the trustee to withdraw all income earned by the IRA at least annually and distribute that amount to the spouse, and no person has the power to appoint any part of the trust to any person other than the spouse.Rev. Rul. 2000-2, 2000-1 CB 305, superseded by Rev. Rul. 2006-26; 2006-1 C.B. 939 Prior to Revenue Ruling 2000-2, where IRA proceeds were to be distributed to a trust benefiting the survivor spouse, marital deduction requirements generally had to be met at both the IRA and the trust level. Thus, in Revenue Ruling 89-89,1989-2 CB 231, superseded by Revenue Ruling 2000-2. a decedent’s executor was permitted to elect to treat a decedent’s IRA as eligible for the QTIP marital deduction where (1) the distribution option elected by the decedent for the IRA required the principal balance of the IRA to be distributed in annual installments to a testamentary QTIP trust and the income earned on the undistributed balance of the IRA to be distributed annually to the trust, and (2) all trust income was payable annually to the decedent’s spouse. A QTIP marital deduction was not available for an IRA with distributions payable to a marital trust where none of the IRA options provided that all income would be distributed at least annually to the marital trust.TAM 9220007.In determining if a spouse has been given an income interest, allocations between income and principal will be respected if state law provides that reasonable apportionments can be made between income and remainder beneficiaries of the total return of the trust (e.g., a unitrust interest in the range of 3 percent to 5 percent could be treated as an income interest).Treas. Reg. §1.643(b)-1. Revenue Ruling 2006-262006-1 CB 939. provides that various means of determining income under state law are permitted under the QTIP marital deduction. Thus, income generally can be determined under state laws based on the Uniform Principal and Income Act or under general traditional statutory or common law rules that provide for allocations between income and principal. A marital deduction also may be available if IRA proceeds are paid to a charitable remainder annuity trust or unitrust and the surviving spouse is the only noncharitable beneficiary (other than certain ESOP remainder beneficiaries).IRC Sec. 2056(b)(8). Presumably, the IRA would have to incorporate all the charitable deduction requirements for such a trust.For the income tax implications of distributions from a traditional IRA, see Q 3616, from a Roth IRA, see Q 3617.