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ESTATE AND GIFT TAX CONSIDERATIONSdeemed owner, the decedent is taxed on such property as though it were a partof his or her transferable estate on death.Dower or Curtesy Interests. The full value of all property subject to dower,curtesy, or other similar marital estate interests of the surviving spouse in thedecedent’s estate are specifically included in the gross estate. 84Transfers within Three Years of Death. At one time, the federal estate tax lawrequired that transfers in contemplation of death be included in the estate of thedecedent. The policy reason was obvious. A person, nearing death, with knowledgethat he or she would soon die, could bypass the estate tax burden throughdeathbed lifetime gifts of most or all of his or her property. 85To rectify this matter, transfers in contemplation of death were recapturedand added back to the taxable estate. This provision, however, also generated agreat deal of litigation over whether certain transfers were in contemplation ofdeath.To forestall deathbed-type transfers, and to avoid litigation over whethercertain transfers were in contemplation of death, a bright-line rule was adopted.All transfers within three years of the decedent’s death were added back to theestate.Except for certain kinds of transfers, the three-year rule does not apply. 86 Thetransfers made within three years of death that are included in the estate are:• Transfers with retained life interests• Transfers taking effect at death• Revocable transfers• Life insurance proceedsCertain other gifts made within three years of death are also included in thegross estate, but only for special purposes and calculations. 87Retained Life Estates. The gross estate includes property in which the decedentretained for life (or a period ascertainable by reference to the decedent’slife) the right to (or the right to appoint) the possession, enjoyment, or incomefrom the property. 88Transfers Taking Effect at Death. The gross estate includes the value of allproperty in which the decedent transferred an interest that can be enjoyed onlyby surviving the decedent, when the decedent retained a reversionary interestthat exceeds 5 percent of the value of the property. 89 A retained interest includesany interest to the decedent, his or her estate, or subject to a power of appointmentin the decedent. 9084 IRC § 2034.85 IRC § 2035.86 IRC § 2035(d).87 IRC § 2035(d)(3).88 IRC § 2036.89 IRC § 2037(a).90 IRC § 2037(b). 236