26 U.S.C. § 2041 — Powers of appointment

Page 2595 TITLE 26—INTERNAL REVENUE CODE § 2041 so acquired by the decedent and any other per- son as joint tenants with right of survivorship and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the property by the number of joint tenants with right of survivorship. (b) Certain joint interests of husband and wife (1) Interests of spouse excluded from gross es- tate Notwithstanding subsection (a), in the case of any qualified joint interest, the value in- cluded in the gross estate with respect to such interest by reason of this section is one-half of the value of such qualified joint interest. (2) Qualified joint interest defined For purposes of paragraph (1), the term ‘‘qualified joint interest’’ means any interest in property held by the decedent and the dece- dent’s spouse as— (A) tenants by the entirety, or (B) joint tenants with right of survivor- ship, but only if the decedent and the spouse of the decedent are the only joint tenants. (Aug. 16, 1954, ch. 736, 68A Stat. 385; Pub. L. 87–834, § 18(a)(2)(G), Oct. 16, 1962, 76 Stat. 1052; Pub. L. 94–455, title XX, § 2002(c)(1), (3), Oct. 4, 1976, 90 Stat. 1855, 1856; Pub. L. 95–600, title V, § 511(a), title VII, § 702(k)(2), Nov. 6, 1978, 92 Stat. 2881, 2932; Pub. L. 96–222, title I, § 105(a)(3), Apr. 1, 1980, 94 Stat. 218; Pub. L. 97–34, title IV, § 403(c)(1)–(3)(A), Aug. 13, 1981, 95 Stat. 301, 302.) Editorial Notes AMENDMENTS 1981—Subsec. (a). Pub. L. 97–34, § 403(c)(2), substituted ‘‘joint tenants with right of survivorship’’ for ‘‘joint tenants’’ in three places. Subsec. (b)(2). Pub. L. 97–34, § 403(c)(1), in redefining ‘‘qualified joint interest’’ substituted provision defin- ing term as meaning any interest in property held by the decedent and the decedent’s spouse as tenants by the entirety, or joint tenants with right of survivor- ship, but only if the decedent and the spouse of the de- cedent are the only joint tenants for provision defining the term as meaning any interest in property held by the decedent and the decedent’s spouse as joint tenants or as tenants by the entirety, but only if such joint in- terest was created by the decedent, the decedent’s spouse, or both, in the case of personal property, the creation of such joint interest constituted in whole or in part a gift for purposes of chapter 12, or in the case of real property, an election under section 2515 applies with respect to the creation of such joint interest, and in the case of a joint tenancy, only the decedent and the decedent’s spouse are joint tenants. Subsecs. (c) to (e). Pub. L. 97–34, § 403(c)(3)(A), re- pealed subsec. (c) respecting value where spouse of de- cedent materially participated in farm or other busi- ness, subsec. (d) relating to joint interests of husband and wife created before 1977, and subsec. (e) covering treatment of certain post-1976 terminations. 1980—Subsec. (c)(1). Pub. L. 96–222, § 105(a)(3)(B), sub- stituted ‘‘subsection (a)’’ for ‘‘subsections (a)’’. Subsec. (c)(2)(C). Pub. L. 96–222, § 105(a)(3)(A), added subpar. (C). 1978—Subsec. (c). Pub. L. 95–600, § 511(a), added subsec. (c). Subsecs. (d), (e). Pub. L. 95–600, § 702(k)(2), added sub- secs. (d) and (e). 1976—Pub. L. 94–455 designated existing provisions as subsec. (a), added heading for subsec. (a), and added subsec. (b). 1962—Pub. L. 87–834 struck out provisions which ex- cepted real property outside of the United States. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1981 AMENDMENT Amendment by Pub. L. 97–34 applicable to estates of decedents dying after Dec. 31, 1981, see section 403(e) of Pub. L. 97–34, set out as a note under section 2056 of this title. EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96–222 effective, except as oth- erwise provided, as if it had been included in the provi- sions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title. EFFECTIVE DATE OF 1978 AMENDMENT Pub. L. 95–600, title V, § 511(b), Nov. 6, 1978, 92 Stat. 2882, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply with re- spect to estates of decedents dying after December 31, 1978.’’ EFFECTIVE DATE OF 1976 AMENDMENT Pub. L. 94–455, title XX, § 2002(d)(3), Oct. 4, 1976, 90 Stat. 1856, provided that: ‘‘The amendment made by subsection (c) [amending this section and section 2515 of this title] shall apply to joint interests created after December 31, 1976.’’ EFFECTIVE DATE OF 1962 AMENDMENT Amendment by Pub. L. 87–834 applicable to estates of decedents dying after Oct. 16, 1962, except as otherwise provided, see section 18(b) of Pub. L. 87–834, set out as a note under section 2031 of this title. CONSIDERATION GIVEN BEFORE JULY 14, 1988 BY DECE- DENT TO NONCITIZEN SPOUSE TREATED AS ORIGINALLY BELONGING TO SPOUSE Pub. L. 101–239, title VII, § 7815(d)(16), Dec. 19, 1989, 103 Stat. 2419, as amended by Pub. L. 101–508, title XI, § 11701(l)(3), Nov. 5, 1990, 104 Stat. 1388–513, provided that: ‘‘For purposes of applying section 2040(a) of the Internal Revenue Code of 1986 with respect to any joint interest to which section 2040(b) of such Code does not apply solely by reason of section 2056(d)(1)(B) of such Code, any consideration furnished before July 14, 1988, by the decedent for such interest to the extent treated as a gift to the spouse of the decedent for purposes of chapter 12 of such Code (or would have been so treated if the donor were a citizen of the United States) shall be treated as consideration originally belonging to such spouse and never acquired by such spouse from the decedent.’’ § 2041. Powers of appointment (a) In general The value of the gross estate shall include the value of all property— (1) Powers of appointment created on or before October 21, 1942 To the extent of any property with respect to which a general power of appointment cre- ated on or before October 21, 1942, is exercised by the decedent— (A) by will, or (B) by a disposition which is of such nature that if it were a transfer of property owned by the decedent, such property would be in- cludible in the decedent’s gross estate under sections 2035 to 2038, inclusive; but the failure to exercise such a power or the complete release of such a power shall not be Page 2596 TITLE 26—INTERNAL REVENUE CODE § 2041 deemed an exercise thereof. If a general power of appointment created on or before October 21, 1942, has been partially released so that it is no longer a general power of appointment, the exercise of such power shall not be deemed to be the exercise of a general power of ap- pointment if— (i) such partial release occurred before November 1, 1951, or (ii) the donee of such power was under a legal disability to release such power on October 21, 1942, and such partial release occurred not later than 6 months after the termination of such legal disability. (2) Powers created after October 21, 1942 To the extent of any property with respect to which the decedent has at the time of his death a general power of appointment created after October 21, 1942, or with respect to which the decedent has at any time exercised or re- leased such a power of appointment by a dis- position which is of such nature that if it were a transfer of property owned by the decedent, such property would be includible in the dece- dent’s gross estate under sections 2035 to 2038, inclusive. For purposes of this paragraph (2), the power of appointment shall be considered to exist on the date of the decedent’s death even though the exercise of the power is sub- ject to a precedent giving of notice or even though the exercise of the power takes effect only on the expiration of a stated period after its exercise, whether or not on or before the date of the decedent’s death notice has been given or the power has been exercised. (3) Creation of another power in certain cases To the extent of any property with respect to which the decedent— (A) by will, or (B) by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be in- cludible in the decedent’s gross estate under section 2035, 2036, or 2037, exercises a power of appointment created after October 21, 1942, by creating another power of appointment which under the applicable local law can be validly exercised so as to postpone the vesting of any estate or interest in such property, or suspend the absolute ownership or power of alienation of such property, for a pe- riod ascertainable without regard to the date of the creation of the first power. (b) Definitions For purposes of subsection (a)— (1) General power of appointment The term ‘‘general power of appointment’’ means a power which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate; except that— (A) A power to consume, invade, or appro- priate property for the benefit of the dece- dent which is limited by an ascertainable standard relating to the health, education, support, or maintenance of the decedent shall not be deemed a general power of ap- pointment. (B) A power of appointment created on or before October 21, 1942, which is exercisable by the decedent only in conjunction with an- other person shall not be deemed a general power of appointment. (C) In the case of a power of appointment created after October 21, 1942, which is exer- cisable by the decedent only in conjunction with another person— (i) If the power is not exercisable by the decedent except in conjunction with the creator of the power—such power shall not be deemed a general power of appointment. (ii) If the power is not exercisable by the decedent except in conjunction with a per- son having a substantial interest in the property, subject to the power, which is adverse to exercise of the power in favor of the decedent—such power shall not be deemed a general power of appointment. For the purposes of this clause a person who, after the death of the decedent, may be possessed of a power of appointment (with respect to the property subject to the decedent’s power) which he may exer- cise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the decedent’s power. (iii) If (after the application of clauses (i) and (ii)) the power is a general power of appointment and is exercisable in favor of such other person—such power shall be deemed a general power of appointment only in respect of a fractional part of the property subject to such power, such part to be determined by dividing the value of such property by the number of such per- sons (including the decedent) in favor of whom such power is exercisable. For purposes of clauses (ii) and (iii), a power shall be deemed to be exercisable in favor of a person if it is exercisable in favor of such person, his estate, his creditors, or the credi- tors of his estate. (2) Lapse of power The lapse of a power of appointment created after October 21, 1942, during the life of the in- dividual possessing the power shall be consid- ered a release of such power. The preceding sentence shall apply with respect to the lapse of powers during any calendar year only to the extent that the property, which could have been appointed by exercise of such lapsed pow- ers, exceeded in value, at the time of such lapse, the greater of the following amounts: (A) $5,000, or (B) 5 percent of the aggregate value, at the time of such lapse, of the assets out of which, or the proceeds of which, the exercise of the lapsed powers could have been satis- fied. (3) Date of creation of power For purposes of this section, a power of ap- pointment created by a will executed on or be- fore October 21, 1942, shall be considered a power created on or before such date if the person executing such will dies before July 1, 1949, without having republished such will, by codicil or otherwise, after October 21, 1942. (Aug. 16, 1954, ch. 736, 68A Stat. 385; Pub. L. 87–834, § 18(a)(2)(H), Oct. 16, 1962, 76 Stat. 1052; Page 2597 TITLE 26—INTERNAL REVENUE CODE § 2044 Pub. L. 94–455, title XX, § 2009(b)(4)(A), Oct. 4, 1976, 90 Stat. 1894.) Editorial Notes AMENDMENTS 1976—Subsec. (a)(2). Pub. L. 94–455 struck out provi- sion that a disclaimer or renunciation of a power of ap- pointment not be deemed a release of that power. 1962—Subsec. (a). Pub. L. 87–834 struck out provisions which excepted real property situated outside of the United States. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94–455 applicable to transfers creating an interest in person disclaiming made after Dec. 31, 1976, see section 2009(e)(2) of Pub. L. 94–455, set out as a note under section 2518 of this title. EFFECTIVE DATE OF 1962 AMENDMENT Amendment by Pub. L. 87–834 applicable to estates of decedents dying after Oct. 16, 1962, except as otherwise provided, see section 18(b) of Pub. L. 87–834, set out as a note under section 2031 of this title. § 2042. Proceeds of life insurance The value of the gross estate shall include the value of all property— (1) Receivable by the executor To the extent of the amount receivable by the executor as insurance under policies on the life of the decedent. (2) Receivable by other beneficiaries To the extent of the amount receivable by all other beneficiaries as insurance under poli- cies on the life of the decedent with respect to which the decedent possessed at his death any of the incidents of ownership, exercisable ei- ther alone or in conjunction with any other person. For purposes of the preceding sen- tence, the term ‘‘incident of ownership’’ in- cludes a reversionary interest (whether arising by the express terms of the policy or other in- strument or by operation of law) only if the value of such reversionary interest exceeded 5 percent of the value of the policy immediately before the death of the decedent. As used in this paragraph, the term ‘‘reversionary inter- est’’ includes a possibility that the policy, or the proceeds of the policy, may return to the decedent or his estate, or may be subject to a power of disposition by him. The value of a re- versionary interest at any time shall be deter- mined (without regard to the fact of the dece- dent’s death) by usual methods of valuation, including the use of tables of mortality and actuarial principles, pursuant to regulations prescribed by the Secretary. In determining the value of a possibility that the policy or proceeds thereof may be subject to a power of disposition by the decedent, such possibility shall be valued as if it were a possibility that such policy or proceeds may return to the de- cedent or his estate. (Aug. 16, 1954, ch. 736, 68A Stat. 387; Pub. L. 94–455, title XIX, § 1906(b)(13) (A), Oct. 4, 1976, 90 Stat. 1834.) Editorial Notes AMENDMENTS 1976—Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’. § 2043. Transfers for insufficient consideration (a) In general If any one of the transfers, trusts, interests, rights, or powers enumerated and described in sections 2035 to 2038, inclusive, and section 2041 is made, created, exercised, or relinquished for a consideration in money or money’s worth, but is not a bona fide sale for an adequate and full con- sideration in money or money’s worth, there shall be included in the gross estate only the ex- cess of the fair market value at the time of death of the property otherwise to be included on account of such transaction, over the value of the consideration received therefor by the dece- dent. (b) Marital rights not treated as consideration (1) In general For purposes of this chapter, a relinquish- ment or promised relinquishment of dower or curtesy, or of a statutory estate created in lieu of dower or curtesy, or of other marital rights in the decedent’s property or estate, shall not be considered to any extent a consid- eration ‘‘in money or money’s worth’’. (2) Exception For purposes of section 2053 (relating to ex- penses, indebtedness, and taxes), a transfer of property which satisfies the requirements of paragraph (1) of section 2516 (relating to cer- tain property settlements) shall be considered to be made for an adequate and full consider- ation in money or money’s worth. (Aug. 16, 1954, ch. 736, 68A Stat. 388; Pub. L. 98–369, div. A, title IV, § 425(a)(1), July 18, 1984, 98 Stat. 803.) Editorial Notes AMENDMENTS 1984—Subsec. (b). Pub. L. 98–369 amended subsec. (b) generally, designating existing provisions as par. (1) and adding par. (2). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98–369, div. A, title IV, § 425(c)(1), July 18, 1984, 98 Stat. 804, provided that: ‘‘The amendments made by subsection (a) [amending this section and section 2053 of this title] shall apply to estates of decedents dying after the date of the enactment of this Act [July 18, 1984].’’ § 2044. Certain property for which marital deduc- tion was previously allowed (a) General rule The value of the gross estate shall include the value of any property to which this section ap- plies in which the decedent had a qualifying in- come interest for life. (b) Property to which this section applies This section applies to any property if—