The IRS, as promised in the regulations issued to implement the portability election under IRC §2010, has now issued a revised Revenue Procedure (Revenue Procedure 2016-49) which modifies the conditions under which a QTIP election will be deemed invalid that were contained in Revenue Procedure 2001-38.

The qualified terminable interest property (QTIP) election under IRC §2056(b)(7) is designed to allow a trust to be created to hold property passing to a surviving spouse with an interest that terminates at his/her death, with ultimate disposition controlled by the trust document itself. When the election is made, the surviving spouse agrees to treat the property as part of his/her estate despite having an interest that normally would be considered solely a life estate. With that election in place, the property qualifies for the unlimited marital exclusion at the first death.