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1. As the decedent's legatee, devisee, heir, or donee; 2. As the decedent's surviving tenant by the entirety or joint tenant; 3. As an appointee under the decedent's exercise of a power or as a taker in default at the decedent's nonexercise of a power; 4. As a beneficiary of insurance on the decedent's life; 5. As the surviving spouse taking under dower or curtesy (or similar statutory interest); and 6. As a transferee of a transfer made by the decedent at any time. Property Interests That You May Not List on Schedule M Do not list the following on Schedule M. 1. The value of any property that does not pass from the decedent to the surviving spouse. 2. Property interests that are not included in the decedent's gross estate. 3. The full value of a property interest for which a deduction was claimed on Schedules J through L. The value of the property interest should be reduced by the deductions claimed with respect to it. 4. The full value of a property interest that passes to the surviving spouse subject to a mortgage or other encumbrance or an obligation of the surviving spouse. Include on Schedule M only the net value of the interest after reducing it by the amount of the mortgage or other debt. 5. Nondeductible terminable interests (described later). 6. Any property interest disclaimed by the surviving spouse. Terminable Interests Certain interests in property passing from a decedent to a surviving spouse are referred to as terminable interests. These are interests that will terminate or fail after the passage of time, or on the occurrence or nonoccurrence of a designated event. Examples are life estates, annuities, estates for terms of years, and patents. The ownership of a bond, note, or other contractual obligation, which when discharged would not have the effect of an annuity for life or for a term, is not considered a terminable interest. Nondeductible terminable interests. Unless you are making a QTIP election, do not enter a terminable interest on Schedule M if: 1. Another interest in the same property passed from the decedent to some other person for less than adequate and full consideration in money or money's worth; and 2. By reason of its passing, the other person or that person's heirs may enjoy part of the property after the 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 spouse was devised real property for life, from the decedent, with remainder to the children. The life interest that passed to the spouse does not qualify for the marital deduction because it will terminate at the spouse’s death and the children will thereafter possess or enjoy the property. However, if the decedent purchased a joint and survivor annuity for themselves and the spouse who survived them, 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 spouse’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 Example—Listing Property Interests on Schedule M Item number Description of property interests passing to surviving spouse. For securities, give CUSIP number. If trust, partnership, or closely held entity, give EIN. Amount 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 1, 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 -38- Instructions for Form 706 (Rev. 09-2022)