Tax Facts

190 / If a decedent directs his or her executor or a trustee to buy a nonrefundable life annuity for the decedent’s surviving spouse, will the annuity qualify for the marital deduction?

No. The surviving spouse’s interest in the annuity is considered a non-deductible terminable interest even though no interest in the annuity has passed from the decedent to any other person.1 Such an annuity will not fail to qualify, however, if it is bought under a general investment power authorizing investments in both terminable interests and other property.2

1. Treas. Reg. § 20.2056(b)-1(c)(2)(i).

2. IRC § 2056(b)(1)(C); Treas. Reg. § 20.2056(b)-1(f).

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