Seven requirements must be met for an interest to qualify for the federal estate tax marital deduction:
1.The decedent must be legally married at the time of his or her death;
2.The person to whom the decedent is legally married at the time of his or her death must survive the decedent;
3.The surviving spouse must be a U.S. citizen (or the property must be held in a Qualified Domestic Trust.
4.The interest passing to the surviving spouse must be includable in the decedentýs gross estate in the United States;
5.The interest must pass to the surviving spouse;
6.The interest received by the surviving spouse must be a deductible interest; and
7.The value of the interest passing to the surviving spouse must be at its net value.
An interest is nondeductible to the extent that it is not includable in the decedentýs 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. Thus, an interest cannot qualify for the marital deduction if it otherwise is deducted under either IRC Section 2053 or Section 2054. IRC Section 2056(b)(9). For example, no marital deduction is allowed for property that passes to the surviving spouse that is used by the estate to pay the decedentýs funeral expenses.
Section 2056(c) of the IRC defines passing to include interests acquired by the surviving spouse by will, intestate succession, dower, curtesy, statutory share, right of survivorship, the exercise or default of exercise of a power of appointment, or pursuant to a life insurance beneficiary designation. The passing requirement also can be satisfied by designating the surviving spouse as the beneficiary of employee death benefits or any other annuity includable in the decedentýs gross estate under IRC Section 2039. (Treas. Reg. §20.2056(c)-1, 2, 3).
A Kansas Marital Deduction Trust with Lifetime Income and Power of Appointment in Beneficiary Spouse and Residuary Trust is an estate planning tool used to maximize tax deductions and provide financial security for a surviving spouse. This type of trust is specifically designed for married couples residing in the state of Kansas. The trust is structured in a way that allows assets to be transferred from the deceased spouse's estate to the trust, while still providing income and control to the surviving spouse. The trust is often set up to take advantage of the marital deduction, which allows for the transfer of unlimited assets to a surviving spouse without incurring any federal estate taxes. Here's how the Kansas Marital Deduction Trust with Lifetime Income and Power of Appointment in Beneficiary Spouse and Residuary Trust works: 1. Trust Creation: The trust is created by the deceased spouse's will or as a stand-alone document during their lifetime. It is irrevocable, meaning it cannot be changed or revoked once established. 2. Funding the Trust: The deceased spouse's assets, such as property, investments, and other valuable assets, are transferred into the trust upon their passing. These assets will be safeguarded and managed by a named trustee. 3. Lifetime Income: The surviving spouse is entitled to receive income generated by the trust assets during their lifetime. This income can come from interest, dividends, rental payments, or other sources, providing the surviving spouse with financial stability. 4. Power of Appointment: The surviving spouse holds the power of appointment and has the authority to determine the ultimate distribution of the trust assets upon their death. They can choose to appoint the assets to themselves, their children, or any other named beneficiaries based on their discretion. 5. Residuary Trust: The trust also includes a residuary trust provision, which ensures that any remaining assets not designated by the surviving spouse will pass to other named beneficiaries, such as children or grandchildren. This provision allows for the preservation and distribution of assets according to the deceased spouse's wishes. There are variations of the Kansas Marital Deduction Trust with Lifetime Income and Power of Appointment in Beneficiary Spouse and Residuary Trust, including: 1. TIP Trust: Qualified Terminable Interest Property Trust, commonly used in a "second marriage" scenario where the deceased spouse wants to provide for their surviving spouse while ensuring the remaining assets ultimately pass to their children from a previous marriage. 2. Testamentary Trust: A trust established through the deceased spouse's will, becoming effective upon their death. This type of trust is often used when the couple didn't establish a trust during their lifetime. 3. Inter Vivos Trust: A trust created during the lifetime of both spouses. This trust allows for the transfer of assets to beneficiaries while the granters are still alive, maintaining control and flexibility over the assets during their lifetime. In summary, a Kansas Marital Deduction Trust with Lifetime Income and Power of Appointment in Beneficiary Spouse and Residuary Trust is a sophisticated estate planning tool that ensures the financial security of a surviving spouse while providing control over the ultimate distribution of assets. The specific type of trust can vary based on the couple's unique circumstances and goals.
