Magazine article The CPA Journal

IRAs and the Marital Deduction

Magazine article The CPA Journal

IRAs and the Marital Deduction

Article excerpt

A recent PLR again dealt with and approved the use of an IRA as qualifying for the estate tax marital deduction.

IRC Sec. 205G(a) provides that the value of the taxable estate of a decedent is determined by subtracting from the gross estate (among other deductions) the value of all interest which passes from the decedent to the surviving spouse.

IRC Sec. 2056(b)(7) broadens and clarifies what type of interests can pass from the decedent to the surviving spouse, which may be qualified or limited, but will still be entitled to the marital deduction. This is typically referred to as qualified terminable interest property (QTIP).

PLR 9324024, which is similar to PLR 052015 and based on Rev. Rul. 89-89, involves the application of the QTIP pro visions and terms of an IRA agreement.


The decedent establishes a trust, life time or testamentary, for the benefit of a spouse whereby all trust income is required to be paid annually to the spouse and no one has a power to appoint trust principal to any one other than the spouse. Upon the spouse's death, the trust would be payable to the decedent's children. This is the classic QTIP trust.

In addition, the decedent establishes an IRA and designates the trust as the beneficiary. The terms provide that the IRA balance as of the decedent's death would be distributed to the trust in equal annual payments over the surviving spouse's life expectancy and all income earned on the undistributed portion of the account balance received during the year must be distributed to the trust annually. …

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