Chapter 34 - § 34.18 • FORM OF MARITAL DEDUCTION PROVISION

• Jurisdiction: Colorado

§ 34.18 • FORM OF MARITAL DEDUCTION PROVISION

Consideration should be given to the form of the provision to take advantage of the marital deduction. If it is a pecuniary devise that is payable outright, in cash or in assets having a value, at the time of distribution, of a fixed amount, the devise carries none of the net probate income until one year after first appointment of a representative, but if the pecuniary devise is in trust, income accrues from death,⁷⁷ as it generally must in order fully to qualify for the deduction. It is a question of interpretation whether the devise is pecuniary in nature (see § 29.5).⁷⁸

It should be noticed that if the devise is pecuniary in nature and can be satisfied in assets at their distribution value, the representative will have a gain or loss problem for income tax purposes. See Chapter 21, "Post-Mortem Estate Planning."

If on the other hand the devise to take advantage of the marital deduction is a share of residue, income accrues from the date of death, whether it is outright or in trust,⁷⁹ and there can be no gain or loss for income tax purposes if residue is to be divided proportionately. See Chapter 21, "Post-Mortem Estate Planning," for the possible consequences of disproportionate distribution of residue.

The net probate income may not be apportionable between the spouse and the other shares of residue in accordance with their respective shares of principal where, by reason of a requirement for apportionment of estate taxes against the shares of residue of others than the spouse, the spouse is entitled to a greater share of the estate left after payment of estate taxes than his or her fractional share of the estate before taxes are charged (see § 34.16).⁸⁰

It may be necessary to seek the aid of the court in order to determine the powers of the representative under the particular provision in the will and the exact manner of complying with the provision. The answer under local law will have an important bearing on the federal tax consequences of the provision for the spouse.⁸¹

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Notes:

^[77] C.R.S. §§§ 15-12-904 and 15-1-417; Estate of Herrington, 70 P.2d 337; Scott on Trusts § 234.2 (3d ed.); Nossaman, Trust Administration & Taxation § 17.01; Restatement (Second) of the Law of Trusts § 234; Annot. 158 A.L.R. 441.

^[78] See Cantwell, "Ten Years of Experience with Marital Deduction," 36 Dicta 197; Golden, "Decade With Marital Deduction," 97 Trusts & Estates 304; Rev. Proc. 64-19, 1964-1 Cum. Bull. (Part 1)...