Tuesday, March 11, 2014
A QTIP election can be used when property passes to a surviving spouse as a terminable interest, and cannot benefit from a marital deduction. Since QTIP election is irrevocable, the IRS was asked to give a determination on if a QTIP can be treated as void when it is unnecessary to lower the estate tax. A revocable living trust was created by a decedent in his will, which would terminate at his death and be distributed to his spouse up to the marital deduction limit. The remainder of the funds would then be distributed annually to his spouse until her death, then to their children. Upon his death, the executor filed a QTIP election, which the estate then asked the IRS to find null and void.
In Private Letter Ruling 201345006, the IRS determined that a QTIP may be treated as null and void when the estate tax is already reduced to zero without the election. Since the QTIP was ruled null and void the income will not be treated as a transfer or a gift by the spouse.
See Dawn S. Markowitz, Disregarding a QTIP, WealthManagement.com, Nov. 19, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.