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§ 8.3 FEDERAL ESTATE TAXfor the marital deduction. 113 Terminable interests are interests that fail after a certainperiod of time, the occurrence of a contingency, or failure of some event. 114An interest that is conditional on the continued survival of the survivingspouse will not be considered a terminable interest when the condition does notexceed six months. 115The portion of a terminable life estate interest in property given to the survivingspouse is entitled to the marital deduction when the spouse is entitled toreceive all the income from the portion of the interest at least annually, withpower of appointment in the surviving spouse (or the spouse’s estate) over thatportion of all the property. 116Similarly, in the case of proceeds from a life insurance policy, or an annuity,if the proceeds are payable in installments (or held to pay interest thereon) andthe installments are payable at least annually (beginning at least 13 months afterthe decedent’s death), such payments qualify for the marital deduction. 117 Thepayments must be payable only to the surviving spouse. Further, the survivingspouse (or the surviving spouse’s estate) must have a power of appointmentover the property.The marital deduction is available, by election, for qualified terminable interestproperty (QTIP). 118 Under a QTIP election, a qualified terminable income interest forthe life of the surviving spouse is made subject to the marital deduction. Thededuction applies when the surviving spouse has a right, for life, to income as tothat portion of property for which an election is made, payable at least annually,or has a life usufruct interest in the property. Further, no person may have apower of appointment over the property during the life of the surviving spouse.Interests passing to the surviving spouse through a qualified charitableremainder trust qualify for the marital deduction. 119 A trust is qualified if it is acharitable remainder annuity trust or a charitable remainder unitrust. The onlynoncharitable beneficiary under this type of a trust must be the survivingspouse.Special rules apply to a surviving spouse who is not a United States citizen.Generally, transfers to such spouses are not entitled to the marital deduction. 120A transfer through a qualified domestic trust, however, is entitled to a maritaldeduction. 121Interrelationship with Administration Expenses. The Supreme Court resolveda controversy as to the interrelationship between the allocation of estate administrationexpenses to estate principal and income, and the amount of the estatetax charitable contribution deduction (and the marital deduction). 122 At the core113 IRC § 2056(b).114 Reg. § 20.2056(b)-1(b).115 IRC § 2056(b)(3).116 IRC § 2056(b)(5).117 IRC § 2056(b)(6).118 IRC § 2056(b)(7).119 IRC § 2056(b)(8).120 IRC § 2056(d)(1).121 IRC §§ 2056(d)(2), 2056A.122 IRC § 2056. 241