Chapter 2 - Marital Deduction Gifts

California Probate Code — §§ 21520-21526

Sections (7)

Enacted by Stats. 1990, Ch. 79.

As used in this chapter:

(a)“Marital deduction” means the federal estate tax deduction allowed for transfers under Section 2056 of the Internal Revenue Code or the federal gift tax deduction allowed for transfers under Section 2523 of the Internal Revenue Code.

(b)“Marital deduction gift” means a transfer of property that is intended to qualify for the marital deduction.

§ 21521

Enacted by Stats. 1990, Ch. 79.

Sections 21524 and 21526 do not apply to a trust that qualifies for the marital deduction under Section 20.2056(e)-2(b) of the Code of Federal Regulations (commonly referred to as the “estate trust”).

§ 21522

Enacted by Stats. 1990, Ch. 79.

If an instrument contains a marital deduction gift:

(a)The provisions of the instrument, including any power, duty, or discretionary authority given to a fiduciary, shall be construed to comply with the marital deduction provisions of the Internal Revenue Code.

(b)The fiduciary shall not take any action or have any power that impairs the deduction as applied to the marital deduction gift.

(c)The marital deduction gift may be satisfied only with property that qualifies for the marital deduction.

§ 21523

Enacted by Stats. 1990, Ch. 79.

(a)The Economic Recovery Tax Act of 1981 was enacted August 13, 1981. This section applies to an instrument executed before September 12, 1981 (before 30 days after enactment of the Economic Recovery Tax Act of 1981).

(b)If an instrument described in subdivision (a) indicates the transferor’s intention to make a gift that will provide the maximum allowable marital deduction, the instrument passes to the recipient an amount equal to the maximum amount of the marital deduction that would have been allowed as of the date of the gift under federal law as it existed before enactment of the Economic Recovery Tax Act of 1981, with adjustments for the following, if applicable:

(1)The provisions of Section 2056(c)(1)(B) and (C) of the Internal Revenue Code in effect immediately before enactment of the Economic Recovery Tax Act of 1981.

(2)To reduce the amount passing under the gift by the final federal estate tax values of any other property that passes under or outside of the instrument and qualifies for the marital deduction. This subdivision does not apply to qualified terminable interest property under Section 2056(b)(7) of the Internal Revenue Code.

§ 21524

Amended by Stats. 2016, Ch. 140, Sec. 1. (SB 1265) Effective January 1, 2017.

If a marital deduction gift is made in trust, in addition to the other provisions of this chapter, each of the following provisions also applies to the marital deduction trust:

(a)The transferor’s spouse is the only beneficiary of income or principal of the marital deduction property as long as the spouse is alive. Nothing in this subdivision precludes exercise by the transferor’s spouse of a power of appointment included in a trust that qualifies as a general power of appointment marital deduction trust.

(b)The transferor’s spouse is entitled to all of the income of the marital deduction property not less frequently than annually, as long as the spouse is alive. For purposes of this subdivision, income shall be construed in a manner consistent with subdivision (b) of Section 2056 and subdivision (f) of Section 2523 of the Internal Revenue Code and shall include a unitrust payment or other allocation of income determined pursuant to a reasonable apportionment of total investment return that meets the requirements of Section 643 of the Internal Revenue Code and the regulations adopted pursuant to that statute.

(c)The transferor’s spouse has the right to require that the trustee of the trust make unproductive marital deduction property productive or to convert it into productive property within a

reasonable time.

§ 21525

Enacted by Stats. 1990, Ch. 79.

(a)If an instrument that makes a marital deduction gift includes a condition that the transferor’s spouse survive the transferor by a period that exceeds or may exceed six months, other than a condition described in subdivision (b), the condition shall be limited to six months as applied to the marital deduction gift.

(b)If an instrument that makes a marital deduction gift includes a condition that the transferor’s spouse survive a common disaster that results in the death of the transferor, the condition shall be limited to the time of the final audit of the federal estate tax return for the transferor’s estate, if any, as applied to the marital deduction gift.

(c)The amendment of subdivision (a) made by Chapter 113 of the Statutes of 1988 is declaratory of, and not a change in, either existing law or former Section 1036 (repealed by Chapter 923 of the Statutes of 1987).

§ 21526

Enacted by Stats. 1990, Ch. 79.

A fiduciary is not liable for a good faith decision to make any election, or not to make any election, referred to in Section 2056(b)(7) or Section 2523(f) of the Internal Revenue Code.