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termination of the surviving spouse's interest. This rule applies even though the interest that passes from the decedent to a person other than the surviving spouse is not included in the gross estate, and regardless of when the interest passes. The rule also applies regardless of whether the surviving spouse's interest and the other person's interest pass from the decedent at the same time. Property interests that are considered to pass to a person other than the surviving spouse are any property interest that (a) passes under a decedent's will or intestacy; (b) was transferred by a decedent during life; or (c) is held by or passed on to any person as a decedent's joint tenant, as appointee under a decedent's exercise of a power, as taker in default at a decedent's release or nonexercise of a power, or as a beneficiary of insurance on the decedent's life. See Regulations section 20.2056(c)-3. For example, a decedent devised real property to his wife for life, with remainder to his children. The life interest that passed to the wife does not qualify for the marital deduction because it will terminate at her death and the children will thereafter possess or enjoy the property. However, if the decedent purchased a joint and survivor annuity for himself and his wife who survived him, the value of the survivor's annuity, to the extent that it is included in the gross estate, qualifies for the marital deduction because even though the interest will terminate on the wife's death, no one else will possess or enjoy any part of the property. The marital deduction is not allowed for an interest that the decedent directed the executor or a trustee to convert, after death, into a terminable interest for the surviving spouse. The marital deduction is not allowed for such an interest even if there was no interest in the property passing to another person and even if the terminable interest would otherwise have been deductible under the exceptions described later for life estates, life insurance, and annuity payments with powers of appointment. For more information, see Regulations section 20.2056(b)-1(f); and Regulations section 20.2056(b)-1(g), Example (7). If any property interest passing from the decedent to the surviving spouse may be paid or otherwise satisfied out of any of a group of assets, the value of the property interest is, for the entry on Schedule M, reduced by the value of any asset or assets that, if passing from the decedent to the surviving spouse, would be nondeductible terminable interests. Examples of property interests that may be paid or otherwise satisfied out of any of a group of assets are a bequest of the residue of the decedent's estate, or of a share of the residue, and a cash legacy payable out of the general estate. Example. A decedent bequeathed $100,000 to the surviving spouse. The general estate includes a term for years (valued at $10,000 in determining the value of the gross estate) in an office building, which interest was retained by the decedent under a deed of the building by gift to a son. Accordingly, the value of the specific bequest entered on Schedule M is $90,000. Life estate with power of appoint- ment in the surviving spouse. A property interest, whether or not in trust, will be treated as passing to the surviving spouse, and will not be treated as a nondeductible terminable interest if the following five conditions apply. 1. The surviving spouse is entitled for life to all of the income from the entire interest. 2. The income is payable annually or at more frequent intervals. 3. The surviving spouse has the power, exercisable in favor of the surviving spouse or the estate of the surviving spouse, to appoint the entire interest. 4. The power is exercisable by the surviving spouse alone and (whether exercisable by will or during life) is exercisable by the surviving spouse in all events. 5. No part of the entire interest is subject to a power in any other person to appoint any part to any person other than the surviving spouse (or the surviving spouse's legal representative or relative if the surviving spouse is disabled; see Regulations section 20.2056(b)-5(a) and Rev. Rul. 85-35, 1985-1 C.B. 328). If these five conditions are satisfied only for a specific portion of the entire interest, see Regulations sections 20.2056(b)-5(b) and -5(c) to determine the amount of the marital deduction. Life insurance, endowment, or annu- ity payments, with power of appoint- ment in surviving spouse. A property interest consisting of the entire proceeds under a life insurance, endowment, or annuity contract is treated as passing from the decedent to the surviving spouse, and will not be treated as a nondeductible terminable interest if the following five conditions apply. 1. The surviving spouse is entitled to receive the proceeds in installments, or is entitled to interest on them, with all amounts payable during the life of the spouse, payable only to the surviving spouse. 2. The installment or interest payments are payable annually, or more frequently, beginning not later than 13 months after the decedent's death. 3. The surviving spouse has the power, exercisable in favor of the surviving spouse or of the estate of the surviving spouse, to appoint all amounts payable under the contract. 4. The power of appointment is exercisable by the surviving spouse alone and (whether exercisable by will or during life) is exercisable by the surviving spouse in all events. 5. No part of the amount payable under the contract is subject to a power in any other person to appoint any part to any person other than the surviving spouse. If these five conditions are satisfied only for a specific portion of the proceeds, see Regulations section 20.2056(b)-6(b) to determine the amount of the marital deduction. Charitable remainder trusts. An interest in a charitable remainder trust will not be treated as a nondeductible terminable interest if: 1. The interest in the trust passes from the decedent to the surviving spouse, and 2. The surviving spouse is the only beneficiary of the trust other than charitable organizations described in section 170(c). A charitable remainder trust is either a charitable remainder annuity trust or a charitable remainder unitrust. See section 664 for descriptions of these trusts. Election To Deduct Qualified Terminable Interest Property (QTIP) You may elect to claim a marital deduction for qualified terminable interest property or property interests. You make the QTIP election simply by listing the qualified terminable interest -36- Instructions for Form 706 (Rev. 09-2021)