Terminable interest rule
Certified Financial Planner glossary · Certified Financial Planner
Definition
The rule denying the marital deduction for interests that will terminate and pass to another, subject to the QTIP and power of appointment exceptions.
Terminable interest rule in plain English
A will leaves the spouse income for life with remainder to the kids, and someone assumes the marital deduction still applies automatically. The terminable interest rule denies the marital deduction for interests that will terminate and pass to another, subject to QTIP and power-of-appointment exceptions. Outright transfers and qualifying exceptions can salvage the deduction; a naked life estate usually will not. Read whether an election or general power saves the day before granting the marital deduction.
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