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Settlement Agreement
Decedent used his probate estate to fund a trust that was to pay his surviving spouse, S, a specific dollar amount each month with the remainder of the trust to benefit Decedent's children. After S filed suit in probate court to seek an elective share under state law (Maine), the estate reached a settlement agreement with her. A cash payment was paid in lieu of the annuity interest. However, no marital deduction was permitted for the cash payment. The annuity payments to S were a terminable interest which would not qualify for a marital deduction. Under state law, the annuity payments to which S was entitled would have been subtracted from any elective share that S could have claimed. Based on Carpenter Estate, CA-4, 95-1, 52 F3d 1266, the deductibility of a settlement amount is determined by the deductibility of the interests that are relinquished.
Source: Estate of Davies, DC Me., 2001-1
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