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 Hawaii Marital Deduction Trust with Lifetime Income and Power of Appointment in Beneficiary Spouse and Residuary Trust is a specific type of trust designed to provide financial benefits and inheritance protection for married couples in the state of Hawaii. This trust offers the surviving spouse lifetime income capabilities and the power to appoint beneficiaries upon their death. Let's delve into the details of this trust while incorporating relevant keywords: 1. Hawaii Marital Deduction Trust: The Hawaii Marital Deduction Trust serves as a legal mechanism to minimize federal estate taxes upon the death of the first spouse. By establishing this trust, couples can pass on their assets to the surviving spouse while utilizing the unlimited marital deduction, which allows the transfer of unlimited assets to the spouse without incurring estate taxes. 2. Lifetime Income Provision: One significant feature of the Hawaii Marital Deduction Trust is the provision of lifetime income for the surviving spouse. By incorporating this provision, the trust ensures that the surviving spouse receives regular income from the trust's assets throughout their lifetime, providing financial stability and security. 3. Power of Appointment: The Power of Appointment provision grants the surviving spouse the authority to appoint beneficiaries to receive the remaining trust assets after their own passing. This allows the surviving spouse to have control over the distribution of assets in a manner that aligns with their preferences and circumstances. 4. Beneficiary Spouse: The beneficiary spouse in the context of this trust refers to the surviving spouse who receives the income generated by the trust during their lifetime. They are the primary beneficiary of the assets contained within the trust and hold the authority to decide who will receive the remaining assets upon their death. 5. Residuary Trust: The Residuary Trust is a vital component within the Hawaii Marital Deduction Trust with Lifetime Income and Power of Appointment. It designates a trust that comes into existence upon the death of the surviving spouse. The Residuary Trust holds the remaining assets not distributed during the beneficiary spouse's lifetime, allowing for further distribution or management as outlined in the trust document. Other types of Hawaii Marital Deduction Trusts with Lifetime Income and Power of Appointment may include variations in the specific provisions, conditions, or requirements of the trust. These variations can differ based on individual preferences, financial goals, and unique circumstances of the couple. It is crucial for couples to consult with an experienced estate planning attorney to evaluate the available options and tailor the trust to their specific needs. Establishing a Hawaii Marital Deduction Trust with Lifetime Income and Power of Appointment in Beneficiary Spouse and Residuary Trust can provide married couples with significant estate planning benefits. This comprehensive estate planning solution ensures financial security for the surviving spouse and allows for strategic asset distribution.
