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Example—Listing Property Interests on Schedule M Item Description of property interests passing to surviving spouse. Amount number For securities, give CUSIP number. If trust, partnership, or closely held entity, give EIN. All other property: B1 One-half the value of a house and lot, 256 South West Street, held by decedent and surviving spouse as joint tenants with right of survivorship under deed dated July 15, 1975 (Schedule E, Part I, item 1) . . . . . . $182,500 B2 Proceeds of Metropolitan Life Insurance Company policy No. 104729, payable in one sum to surviving spouse (Schedule D, item 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 B3 Cash bequest under Paragraph Six of will . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 This rule applies even though the If any property interest passing from Property Interests That You interest that passes from the decedent the decedent to the surviving spouse May Not List on Schedule M to a person other than the surviving may be paid or otherwise satisfied out You should not list on Schedule M: spouse is not included in the gross of any of a group of assets, the value of estate, and regardless of when the the property interest is, for the entry on 1. The value of any property that interest passes. The rule also applies Schedule M, reduced by the value of does not pass from the decedent to the regardless of whether the surviving any asset or assets that, if passing from surviving spouse; spouse’s interest and the other the decedent to the surviving spouse, 2. Property interests that are not person’s interest pass from the would be nondeductible terminable included in the decedent’s gross estate; decedent at the same time. interests. Examples of property 3. The full value of a property interests that may be paid or otherwise interest for which a deduction was Property interests that are satisfied out of any of a group of assets claimed on Schedules J through L. The considered to pass to a person other are a bequest of the residue of the value of the property interest should be than the surviving spouse are any decedent’s estate, or of a share of the reduced by the deductions claimed with property interest that: (a) passes under residue, and a cash legacy payable out respect to it; a decedent’s will or intestacy; (b) was of the general estate. 4. The full value of a property transferred by a decedent during life; or interest that passes to the surviving Example. A decedent bequeathed (c) is held by or passed on to any spouse subject to a mortgage or other $100,000 to the surviving spouse. The person as a decedent’s joint tenant, as encumbrance or an obligation of the general estate includes a term for years appointee under a decedent’s exercise surviving spouse. Include on Schedule (valued at $10,000 in determining the of a power, as taker in default at a M only the net value of the interest after value of the gross estate) in an office decedent’s release or nonexercise of a reducing it by the amount of the building, which interest was retained by power, or as a beneficiary of insurance mortgage or other debt; the decedent under a deed of the on the decedent’s life. 5. Nondeductible terminable building by gift to a son. Accordingly, For example, a decedent devised interests (described below); or the value of the specific bequest real property to his wife for life, with 6. Any property interest disclaimed entered on Schedule M is $90,000. remainder to his children. The life by the surviving spouse. Life estate with power of interest that passed to the wife does appointment in the surviving not qualify for the marital deduction Terminable Interests spouse. A property interest, whether because it will terminate at her death or not in trust, will be treated as passing Certain interests in property passing and the children will thereafter possess to the surviving spouse, and will not be from a decedent to a surviving spouse or enjoy the property. treated as a nondeductible terminable are referred to as terminable interests. However, if the decedent purchased interest if: (a) the surviving spouse is These are interests that will terminate a joint and survivor annuity for himself entitled for life to all of the income from or fail after the passage of time, or on and his wife who survived him, the the entire interest; (b) the income is the occurrence or nonoccurrence of a value of the survivor’s annuity, to the payable annually or at more frequent designated event. Examples are: life extent that it is included in the gross intervals; (c) the surviving spouse has estates, annuities, estates for terms of estate, qualifies for the marital the power, exercisable in favor of the years, and patents. deduction because even though the surviving spouse or the estate of the The ownership of a bond, note, or interest will terminate on the wife’s surviving spouse, to appoint the entire other contractual obligation, which death, no one else will possess or interest; (d) the power is exercisable by when discharged would not have the enjoy any part of the property. the surviving spouse alone and effect of an annuity for life or for a term, (whether exercisable by will or during The marital deduction is not allowed is not considered a terminable interest. life) is exercisable by the surviving for an interest that the decedent Nondeductible terminable interests. spouse in all events; and (e) no part of directed the executor or a trustee to A terminable interest is nondeductible. the entire interest is subject to a power convert, after death, into a terminable Unless you are making a QTIP election, in any other person to appoint any part interest for the surviving spouse. The a terminable interest should not be to any person other than the surviving marital deduction is not allowed for entered on Schedule M if: spouse (or the surviving spouse’s legal such an interest even if there was no representative or relative if the surviving 1. Another interest in the same interest in the property passing to spouse is disabled. See Revenue property passed from the decedent to another person and even if the Ruling 85-35, 1985-1 C.B. 328). If some other person for less than terminable interest would otherwise these five conditions are satisfied only adequate and full consideration in have been deductible under the for a specific portion of the entire money or money’s worth; and exceptions described below for life interest, see the section 2056(b) 2. By reason of its passing, the estates, life insurance, and annuity regulations to determine the amount of other person or that person’s heirs may payments with powers of appointment. the marital deduction. enjoy part of the property after the For more information, see Regulations termination of the surviving spouse’s sections 20.2056(b)-1(f) and Life insurance, endowment, or interest. 20.2056(b)-1(g), Example (7). annuity payments, with power of -28- Part Instructions