Probate & Trust Law Section Conference Manual ... - Minnesota CLE

d) The amount subject to the election can be increased, at least in some
situations. See PLR 200832011 (Aug. 8, 2008) (allowing estate tax marital
deduction for amount greater than that elected on the estate tax return, where
the return election was intended to reduce the estate tax to zero, but the
attorney and executor made a mistake as to the amount of deduction required
to produce that result).
3) Partial QTIP Election
a) Because the QTIP election is in fact an election—it is not mandatory,
the personal representative can determine not only whether to make the
election but also to what portion of the trust the election shall apply. On many
estates, it will seem apparent that a full marital deduction is desirable.
However, some situations may arise where a full marital deduction is not
appropriate, such as the assets may be subject to higher tax rates in the
surviving spouse’s estate and the surviving spouse has a short life expectancy;
or the credit shelter trust was not fully funded on its own.
b) Post-mortem planning: The QTIP election can be made on a timely
filed estate tax return, including extensions. Thus, the filing of the estate tax
return and the decision of whether to QTIP and how much can be delayed for
15 months after the first death. During this time, the estate tax situation of the
surviving spouse may become more clear.
c) To make a partial QTIP election, the personal representative’s
election language simply needs to identify the portion of the trust to which the
election is being made and that portion of the trust is reported on Schedule M
of the estate tax return. The remainder of the trust does not receive a marital
deduction and will be subject to estate taxes.
4) Reverse QTIP Election
a) What it is: A reverse QTIP election is a combination of two
elections. The two elections provide the estate of the first spouse to die with a
marital estate tax deduction and a generation skipping transfer tax planning
benefit.
b) Why it is done: The purpose is to enable the first spouse to die the
chance to use his GST exemption while still benefiting from the marital estate
tax deduction.
(i) Usually, the transferor of property for GST purposes is the
last person in whose estate the assets are taxed for estate tax purposes.
Thus, in a standard QTIP situation, the transferor of the QTIP trust for
GST tax purposes is the second spouse to die because the marital
QTIP trust is taxed in the surviving spouse’s estate.
(ii) To enable the first spouse to die to utilize his GST exemption
while still benefiting from the marital deduction, the reverse QTIP
election allows the first spouse to die to be treated as the transferor of
the QTIP assets for GST tax purposes. The benefit is that then both
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