194 / What is a general power to appoint the proceeds of a life insurance policy for purposes of the marital deduction?

For purposes of the marital deduction, the donee of a general power of appointment must have the power to appoint the property to himself or herself or to his or her estate.¹ Thus, if the surviving spouse-beneficiary has the power to revoke contingent beneficiaries and name his or her estate instead, the surviving spouse-beneficiary is deemed to have a general power to appoint to his or her estate. Or, if the surviving spouse-beneficiary can withdraw the principal sum for his or her own use, the surviving spouse-beneficiary is deemed to have a general power to appoint to himself or to herself or to his or her estate.² The surviving spouse-beneficiary need not possess both powers; either will suffice. The term “power to appoint” need not be used in the insurance policy. Thus, even where the surviving spouse is not given the power to revoke contingent beneficiaries, the proceeds will qualify if the surviving spouse is given the power to withdraw the proceeds during his or her life and the power is exercisable in all events. Insurance companies normally impose some administrative restrictions on the exercise of withdrawal rights. Regulations state, however, that limitations of a formal nature – such as requirements that reasonable intervals must elapse between partial exercise – will not cause disqualification.³

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1. IRC § 2056(b)(6).

2. Treas. Reg. § 20.2056(b)-6(e)(4); Rev. Rul. 55-277, 1955-1 CB 456.

3. Treas. Reg. § 20.2056(b)-5(g)(4). See also Estate of Cornwell v. Commissioner, 37 TC 688 (1962); Estate of Jennings v. Commissioner, 39 TC 417 (1962).