[Code of Federal Regulations]
[Title 26, Volume 14]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR25.2523(e)-1]

[Page 610-617]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 25_GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954--Table of Contents
 
Sec.  25.2523(e)-1  Marital deduction; life estate with power of appointment in donee spouse.

    (a) In general. Section 2523(e) provides that if an interest in 
property is transferred by a donor to his spouse (whether or not in 
trust) and the spouse is entitled for life to all the income from a 
specific portion of the entire interest, with a power in her to appoint 
the entire interest of all the income from interest or the specific 
portion, the interest transferred to her is a deductible interest, to 
the extent that it satisfies all five of the conditions set forth below 
(see paragraph (b) of this section if one or more of the conditions is 
satisfied as to only a portion of the interest):
    (1) The donee spouse must be entitled for life to all of the income 
from the entire interest or a specific portion of the entire interest, 
or to a specific portion of all the income from the entire interest.
    (2) The income payable to the donee spouse must be payable annually 
or at more frequent intervals.
    (3) The donee spouse must have the power to appoint the entire 
interest of the specific portion to either herself or her estate.
    (4) The power in the donee spouse must be exercisable by her alone 
and (whether exercisable by will or during life) must be exercisable in 
all events.
    (5) The entire interest or the specific portion must not be subject 
to a power in any other person to appoint any part to any person other 
than the donee spouse.
    (b) Specific portion; deductible amount. If either the right to 
income or the power of appointment given to the donee spouse pertains 
only to a specific portion of a property interest, the portion of the 
interest which qualifies as a deductible interest is limited to the 
extent that the rights in the donee

[[Page 611]]

spouse meet all of the five conditions described in paragraph (a) of 
this section. While the rights over the income and the power must 
coexist as to the same interest in property, it is not necessary that 
the rights over the income or the power as to such interest be in the 
same proportion. However, if the rights over income meeting the required 
conditions set forth in paragraph (a) (1) and (2) of this section extend 
over a smaller share of the property interest than the share with 
respect to which the power of appointment requirements set forth in 
paragraph (a) (3) through (5) of this section are satisfied, the 
deductible interest is limited to the smaller share. Conversely, if a 
power of appointment meeting all the requirements extends to a smaller 
portion of the property interest than the portion over which the income 
rights pertain, the deductible interest cannot exceed the value of the 
portion to which such power of appointment applies. Thus, if the donor 
gives to the donee spouse the right to receive annually all of the 
income from a particular property interest and a power of appointment 
meeting the specifications prescribed in paragraph (a) (3) through (5) 
of this section as to only one-half of the property interest, then only 
one-half of the property interest is treated as a deductible interest. 
Correspondingly, if the income interest of the spouse satisfying the 
requirements extends to only one-fourth of the property interest and a 
testamentary power of appointment satisfying the requirements extends to 
all of the property interest, then only one-fourth of the interest in 
the spouse qualifies as a deductible interest. Further, if the donee 
spouse has no right to income from a specific portion of a property 
interest but a testamentary power of appointment which meets the 
necessary conditions over the entire interest, then none of the interest 
qualifies for the deduction. In addition, if, from the time of the 
transfer, the donee spouse has a power of appointment meeting all of the 
required conditions over three-fourths of the entire property interest 
and the prescribed income rights over the entire interest, but with a 
power in another person to appoint one-half of the entire interest, the 
value of the interest in the donee spouse over only one-half of the 
property interest will qualify as a deductible interest.
    (c) Meaning of specific portion--(1) In general. Except as provided 
in paragraphs (c)(2) and (c)(3) of this section, a partial interest in 
property is not treated as a specific portion of the entire interest. In 
addition, any specific portion of an entire interest in property is 
nondeductible to the extent the specific portion is subject to invasion 
for the benefit of any person other than the donee spouse, except in the 
case of a deduction allowable under section 2523(e), relating to the 
exercise of a general power of appointment by the donee spouse.
    (2) Fraction or percentage share. Under section 2523(e), a partial 
interest in property is treated as a specific portion of the entire 
interest if the rights of the donee spouse in income, and the required 
rights as to the power described in Sec.  25.2523(e)-1(a), constitute a 
fractional or percentage share of the entire property interest, so that 
the donee spouse's interest reflects its proportionate share of the 
increase or decrease in the value of the entire property interest to 
which the income rights and the power relate. Thus, if the spouse's 
right to income and the spouse's power extend to a specified fraction or 
percentage of the property, or its equivalent, the interest is in a 
specific portion of the property. In accordance with paragraph (b) of 
this section, if the spouse has the right to receive the income from a 
specific portion of the trust property (after applying paragraph (c)(3) 
of this section) but has a power of appointment over a different 
specific portion of the property (after applying paragraph (c)(3) of 
this section), the marital deduction is limited to the lesser specific 
portion.
    (3) Special rule in the case of gifts made on or before October 24, 
1992. In the case of gifts within the purview of the effective date rule 
contained in paragraph (c)(3)(iii) of this section:
    (i) A specific sum payable annually, or at more frequent intervals, 
out of the property and its income that is not limited by the income of 
the property is treated as the right to receive the income from a 
specific portion of the

[[Page 612]]

property. The specific portion, for purposes of paragraph (c)(2) of this 
section, is the portion of the property that, assuming the interest rate 
generally applicable for the valuation of annuities at the time of the 
donor's gift, would produce income equal to such payments. However, a 
pecuniary amount payable annually to a donee spouse is not treated as a 
right to the income from a specific portion of trust property for 
purposes of this paragraph (c)(3)(i) if any person other than the donee 
spouse may receive, during the donee spouse's lifetime, any distribution 
of the property. To determine the applicable interest rate for valuing 
annuities, see sections 2512 and 7520 and the regulations under those 
sections.
    (ii) The right to appoint a pecuniary amount out of a larger fund 
(or trust corpus) is considered the right to appoint a specific portion 
of such fund or trust in an amount equal to such pecuniary amount.
    (iii) The rules contained in paragraphs (c)(3) (i) and (ii) of this 
section apply with respect to gifts made on or before October 24, 1992.
    (4) Local law. A partial interest in property is treated as a 
specific portion of the entire interest if it is shown that the donee 
spouse has rights under local law that are identical to those the donee 
spouse would have acquired had the partial interest been expressed in 
terms satisfying the requirements of paragraph (c)(2) of this section 
(or paragraph (c)(3) of this section if applicable).
    (5) Examples. The following examples illustrate the application of 
paragraphs (b) and (c) of this section, where D, the donor, transfers 
property to D's spouse, S:

    Example 1. Spouse entitled to the lesser of an annuity or a fraction 
of trust income. Prior to October 24, 1992, D transferred in trust 500 
identical shares of X Company stock, valued for gift tax purposes at 
$500,000. The trust provided that during the lifetime of D's spouse, S, 
the trustee is to pay annually to S the lesser of one-half of the trust 
income or $20,000. Any trust income not paid to S is to be accumulated 
in the trust and may not be distributed during S's lifetime. S has a 
testamentary general power of appointment over the entire trust 
principal. The applicable interest rate for valuing annuities as of the 
date of D's gift under section 7520 is 10 percent. For purposes of 
paragraphs (a) through (c) of this section, S is treated as receiving 
all of the income from the lesser of one-half of the stock ($250,000), 
or $200,000, the specific portion of the stock which, as determined in 
accordance with Sec.  25.2523(e)-1(c)(3)(i) of this chapter, would 
produce annual income of $20,000 (20,000/.10). Accordingly, the marital 
deduction is limited to $200,000 (200,000/500,000 or \2/5\ of the value 
of the trust.)
    Example 2. Spouse possesses power and income interest over different 
specific portions of trust. The facts are the same as in Example 1 
except that S's testamentary general power of appointment is exercisable 
over only \1/4\ of the trust principal. Consequently, under section 
2523(e), the marital deduction is allowable only for the value of \1/4\ 
of the trust ($125,000); i.e., the lesser of the value of the portion 
with respect to which S is deemed to be entitled to all of the income 
(\2/5\ of the trust or $200,000), or the value of the portion with 
respect to which S possesses the requisite power of appointment (\1/4\ 
of the trust or $125,000).
    Example 3. Power of appointment over shares of stock constitutes a 
power over a specific portion. D transferred 250 identical shares of Y 
company stock to a trust under the terms of which trust income is to be 
paid annually to S, during S's lifetime. S was given a testamentary 
general power of appointment over 100 shares of stock. The trust 
provides that if the trustee sells the Y company stock, S's general 
power of appointment is exercisable with respect to the sale proceeds or 
the property in which the proceeds are reinvested. Because the amount of 
property represented by a single share of stock would be altered if the 
corporation split its stock, issued stock dividends, made a distribution 
of capital, etc., a power to appoint 100 shares at the time of S's death 
is not necessarily a power to appoint the entire interest that the 100 
shares represented on the date of D's gift. If it is shown that, under 
local law, S has a general power to appoint not only the 100 shares 
designated by D but also 100/250 of any distributions by the corporation 
that are included in trust principal, the requirements of paragraph 
(c)(2) of this section are satisfied and S is treated as having a 
general power to appoint 100/250 of the entire interest in the 250 
shares. In that case, the marital deduction is limited to 40 percent of 
the trust principal. If local law does not give S that power, the 100 
shares would not constitute a specific portion under Sec.  25.2523(e)-
1(c) (including Sec.  25.2523(e)-1(c)(3)(ii)). The nature of the asset 
is such that a change in the capitalization of the corporation could 
cause an alteration in the original value represented by the shares at 
the time of the transfer and is thus not a specific portion of the 
trust.


[[Page 613]]


    (d) Definition of ``entire interest''. Since a marital deduction is 
allowed for each qualifying separate interest in property transferred by 
the donor to the donee spouse, for purposes of paragraphs (a) and (b) of 
this section, each property interest with respect to which the donee 
spouse received some rights is considered separately in determining 
whether her rights extend to the entire interest or to a specific 
portion of the entire interest. A property interest which consists of 
several identical units of property (such as a block of 250 shares of 
stock, whether the ownership is evidenced by one or several 
certificates) is considered one property interest, unless certain of the 
units are to be segregated and accorded different treatment, in which 
case each segregated group of items is considered a separate property 
interest. The bequest of a specified sum of money constitutes the 
bequest of a separate property interest if immediately following the 
transfer and thenceforth it, and the investments made with it, must be 
so segregated or accounted for as to permit its identification as a 
separate item of property. The application of this paragraph may be 
illustrated by the following examples:

    Example (1). The donor transferred to a trustee three adjoining 
farms, Blackacre, Whiteacre, and Greenacre. The trust instrument 
provided that during the lifetime of the donee spouse the trustee should 
pay her all of the income from the trust. Upon her death, all of 
Blackacre, a one-half interest in Whiteacre, and a one-third interest in 
Greenacre were to be distributed to the person or persons appointed by 
her in her will. The donee spouse is considered as being entitled to all 
of the income from the entire interest in Blackacre, all of the income 
from the entire interest in Whiteacre, and all of the income from the 
entire interest in Greenacre. She also is considered as having a power 
of appointment over the entire interest in Blackacre, over one-half of 
the entire interest in Whiteacre, and over one-third of the entire 
interest in Greenacre.
    Example (2). The donor transferred $250,000 to C, as trustee. C is 
to invest the money and pay all of the income from the investments to W, 
the donor's spouse, annually. W was given a general power, exercisable 
by will, to appoint one-half of the corpus of the trust. Here, 
immediately following establishment of the trust, the $250,000 will be 
sufficiently segregated to permit its identification as a separate item, 
and the $250,000 will constitute an entire property interest. Therefore, 
W has a right to income and a power of appointment such that one-half of 
the entire interest is a deductible interest.
    Example (3). The donor transferred 100 shares of Z Corporation stock 
to D, as trustee. W, the donor's spouse, is to receive all of the income 
of the trust annually and is given a general power, exercisable by will, 
to appoint out of the trust corpus the sum of $25,000. In this case the 
$25,000 is not, immediately following establishment of the trust, 
sufficiently segregated to permit its identification as a separate item 
of property in which the donee spouse has the entire interest. 
Therefore, the $25,000 does not constitute the entire interest in a 
property for the purpose of paragraphs (a) and (b) of this section.

    (e) Application of local law. In determining whether or not the 
conditions set forth in paragraphs (a) (1) through (5) of this section 
are satisfied by the instrument of transfer, regard is to be had to the 
applicable provisions of the law of the jurisdiction under which the 
interest passes and, if the transfer is in trust, the applicable 
provisions of the law governing the administration of the trust. For 
example, silence of a trust instrument as to the frequency of payment 
will not be regarded as a failure to satisfy the condition set forth in 
paragraph (a)(2) of this section that income must be payable to the 
donee spouse annually or more frequently unless the applicable law 
permits payment to be made less frequently than annually. The principles 
outlined in this paragraph and paragraphs (f) and (g) of this section 
which are applied in determining whether transfers in trust meet such 
conditions are equally applicable in ascertaining whether, in the case 
of interests not in trust, the donee spouse has the equivalent in rights 
over income and over the property.
    (f) Right to income. (1) If an interest is transferred in trust, the 
donee spouse is ``entitled for life to all of the income from the entire 
interest or a specific portion of the entire interest,'' for the purpose 
of the condition set forth in paragraph (a)(1) of this section, if the 
effect of the trust is to give her substantially that degree of 
beneficial enjoyment of the trust property during her life which the 
principles of the law of trust accord to a person who is unqualifiedly 
designated as the life beneficiary of a trust. Such degree of enjoyment 
is given only if it was the

[[Page 614]]

donor's intention, as manifested by the terms of the trust instrument 
and the surrounding circumstances, that the trust should produce for the 
donee spouse during her life such an income, or that the spouse should 
have such use of the trust property as is consistent with the value of 
the trust corpus and with its preservation. The designation of the 
spouse as sole income beneficiary for life of the entire interest or a 
specific portion of the entire interest will be sufficient to qualify 
the trust unless the terms of the trust and the surrounding 
circumstances considered as a whole evidence an intention to deprive the 
spouse of the requisite degree of enjoyment. In determining whether a 
trust evidences that intention, the treatment required or permitted with 
respect to individual items must be considered in relation to the entire 
system provided for the administration of the trust. In addition, the 
spouse's interest shall meet the condition set forth in paragraph (a)(1) 
of this section if the spouse is entitled to income as defined or 
determined by applicable local law that provides for a reasonable 
apportionment between the income and remainder beneficiaries of the 
total return of the trust and that meets the requirements of Sec.  
1.643(b)-1 of this chapter.
    (2) If the over-all effect of a trust is to give to the donee spouse 
such enforceable rights as will preserve to her the requisite degree of 
enjoyment, it is immaterial whether that result is effected by rules 
specifically stated in the trust instrument, or, in their absence, by 
the rules for the management of the trust property and the allocation of 
receipts and expenditures supplied by the State law. For example, a 
provision in the trust instrument for amortization of bond premium by 
appropriate periodic charges to interest will not disqualify the 
interest transferred in trust even though there is no State law 
specifically authorizing amortization or there is a State law denying 
amortization which is applicable only in the absence of such a provision 
in the trust instrument.
    (3) In the case of a trust, the rules to be applied by the trustee 
in allocation of receipts and expenses between income and corpus must be 
considered in relation to the nature and expected productivity of the 
assets transferred in trust, the nature and frequency of occurrence of 
the expected receipts, and any provisions as to change in the form of 
investments. If it is evident from the nature of the trust assets and 
the rules provided for management of the trust that the allocation to 
income of such receipts as rents, ordinary cash dividends and interest 
will give to the spouse the substantial enjoyment during life required 
by the statute, provisions that such receipts as stock dividends and 
proceeds from the conversion of trust assets shall be treated as corpus 
will not disqualify the interest transferred in trust. Similarly, 
provision for a depletion charge against income in the case of trust 
assets which are subject to depletion will not disqualify the interest 
transferred in trust, unless the effect is to deprive the spouse of the 
requisite beneficial enjoyment. The same principle is applicable in the 
case of depreciation, trustees' commissions, and other charges.
    (4) Provisions granting administrative powers to the trustees will 
not have the effect of disqualifying an interest transferred in trust 
unless the grant of powers evidences the intention to deprive the donee 
spouse of the beneficial enjoyment required by the statute. Such an 
intention will not be considered to exist if the entire terms of the 
instrument are such that the local courts will impose reasonable 
limitations upon the exercise of the powers. Among the powers which if 
subject to reasonable limitations will not disqualify the interest 
transferred in trust are the power to determine the allocation or 
apportionment of receipts and disbursements between income and corpus, 
the power to apply the income or corpus for the benefit of the spouse, 
and the power to retain the assets transferred to the trust. For 
example, a power to retain trust assets which consist substantially of 
unproductive property will not disqualify the interest if the applicable 
rules for the administration of the trust require, or permit the spouse 
to require, that the trustee either make the property productive or 
convert it within a reasonable time.

[[Page 615]]

Nor will such a power disqualify the interest if the applicable rules 
for administration of the trust require the trustee to use the degree of 
judgment and care in the exercise of the power which a prudent man would 
use if he were owner of the trust assets. Further, a power to retain a 
residence for the spouse or other property for the personal use of the 
spouse will not disqualify the interest transferred in trust.
    (5) An interest transferred in trust will not satisfy the condition 
set forth in paragraph (a)(1) of this section that the donee spouse be 
entitled to all the income if the primary purpose of the trust is to 
safeguard property without providing the spouse with the required 
beneficial enjoyment. Such trusts include not only trusts which 
expressly provide for the accumulation of the income but also trusts 
which indirectly accomplish a similar purpose. For example, assume that 
the corpus of a trust consists substantially of property which is not 
likely to be income producing during the life of the donee spouse and 
that the spouse cannot compel the trustee to convert or otherwise deal 
with the property as described in subparagraph (4) of this paragraph. An 
interest transferred to such a trust will not qualify unless the 
applicable rules for the administration require, or permit the spouse to 
require, that the trustee provide the required beneficial enjoyment, 
such as by payments to the spouse out of other assets of the trust.
    (6) If a trust may be terminated during the life of the donee 
spouse, under her exercise of a power of appointment or by distribution 
of the corpus to her, the interest transferred in trust satisfies the 
condition set forth in paragraph (a)(1) of this section (that the spouse 
be entitled to all the income) if she (i) is entitled to the income 
until the trust terminates, or (ii) has the right, exercisable in all 
events, to have the corpus distributed to her at any time during her 
life.
    (7) An interest transferred in trust fails to satisfy the condition 
set forth in paragraph (a)(1) of this section, that the spouse be 
entitled to all the income, to the extent that the income is required to 
be accumulated in whole or in part or may be accumulated in the 
discretion of any person other than the donee spouse; to the extent that 
the consent of any person other than the donee spouse is required as a 
condition precedent to distribution of the income; or to the extent that 
any person other than the donee spouse has the power to alter the terms 
of the trust so as to deprive her of her right to the income. An 
interest transferred in trust will not fail to satisfy the condition 
that the spouse be entitled to all the income merely because its terms 
provide that the right of the donee spouse to the income shall not be 
subject to assignment, alienation, pledge, attachment or claims of 
creditors.
    (8) In the case of an interest transferred in trust, the terms 
``entitled for life'' and ``payable annually or at more frequent 
intervals'', as used in the conditions set forth in paragraph (a) (1) 
and (2) of this section, require that under the terms of the trust the 
income referred to must be currently (at least annually; see paragraph 
(e) of this section) distributable to the spouse or that she must have 
such command over the income that it is virtually hers. Thus, the 
conditions in paragraph (a) (1) and (2) of this section are satisfied in 
this respect if, under the terms of the trust instrument, the donee 
spouse has the right exercisable annually (or more frequently) to 
require distribution to herself of the trust income, and otherwise the 
trust income is to be accumulated and added to corpus. Similarly, as 
respects the income for the period between the last distribution date 
and the date of the spouse's death, it is sufficient if that income is 
subject to the spouse's power to appoint. Thus, if the trust instrument 
provides that income accrued or undistributed on the date of the 
spouse's death is to be disposed of as if it had been received after her 
death, and if the spouse has a power of appointment over the trust 
corpus, the power necessarily extends to the undistributed income.
    (g) Power of appointment in donee spouse. (1) The conditions set 
forth in paragraphs (a) (3) and (4) of this section, that is, that the 
donee spouse must have a power of appointment exercisable in favor of 
herself or her estate and exercisable alone and in all

[[Page 616]]

events, are not met unless the power of the donee spouse to appoint the 
entire interest or a specific portion of it falls within one of the 
following categories:
    (i) A power so to appoint fully exercisable in her own favor at any 
time during her life (as, for example, an unlimited power to invade); or
    (ii) A power so to appoint exercisable in favor of her estate. Such 
a power, if exercisable during life, must be fully exercisable at any 
time during life, or if exercisable by will, must be fully exercisable 
irrespective of the time of her death; or
    (iii) A combination of the powers described under subdivisions (i) 
and (ii) of this subparagraph. For example, the donee spouse may, until 
she attains the age of 50 years, have a power to appoint to herself and 
thereafter have a power to appoint to her estate. However, the condition 
that the spouse's power must be exercisable in all events is not 
satisfied unless irrespective of when the donee spouse may die the 
entire interest or a specific portion of it will at the time of her 
death be subject to one power or the other.
    (2) The power of the donee spouse must be a power to appoint the 
entire interest or a specific portion of it as unqualified owner (and 
free of the trust if a trust is involved, or free of the joint tenancy 
if a joint tenancy is involved) or to appoint the entire interest or a 
specific portion of it as a part of her estate (and free of the trust if 
a trust is involved), that is, in effect, to dispose of it to whomsoever 
she pleases. Thus, if the donor transferred property to a son and the 
donee spouse as joint tenants with right of survivorship and under local 
law the donee spouse has a power of severance exercisable without 
consent of the other joint tenant, and by exercising this power could 
acquire a one-half interest in the property as a tenant in common, her 
power of severance will satisfy the condition set forth in paragraph 
(a)(3) of this section that she have a power of appointment in favor of 
herself or her estate. However, if the donee spouse entered into a 
binding agreement with the donor to exercise the power only in favor of 
their issue, that condition is not met. An interest transferred in trust 
will not be regarded as failing to satisfy the condition merely because 
takers in default of the donee spouse's exercise of the power are 
designated by the donor. The donor may provide that, in default of 
exercise of the power, the trust shall continue for an additional 
period.
    (3) A power is not considered to be a power exercisable by a donee 
spouse alone and in all events as required by paragraph (a)(4) of this 
section if the exercise of the power in the donee spouse to appoint the 
entire interest or a specific portion of it to herself or to her estate 
requires the joinder or consent of any other person. The power is not 
``exercisable in all events'', if it can be terminated during the life 
of the donee spouse by any event other than her complete exercise or 
release of it. Further, a power is not ``exercisable in all events'' if 
it may be exercised for a limited purpose only. For example, a power 
which is not exercisable in the event of the spouse's remarriage is not 
exercisable in all events. Likewise, if there are any restrictions, 
either by the terms of the instrument or under applicable local law, on 
the exercise of a power to consume property (whether or not held in 
trust) for the benefit of the spouse, the power is not exercisable in 
all events. Thus, if a power of invasion is exercisable only for the 
spouse's support, or only for her limited use, the power is not 
exercisable in all events. In order for a power of invasion to be 
exercisable in all events, the donee spouse must have the unrestricted 
power exercisable at any time during her life to use all or any part of 
the property subject to the power, and to dispose of it in any manner, 
including the power to dispose of it by gift (whether or not she has 
power to dispose of it by will).
    (4) If the power is in existence at all times following the transfer 
of the interest, limitations of a formal nature will not disqualify the 
interest. Examples of formal limitations on a power exercisable during 
life are requirements that an exercise must be in a particular form, 
that it must be filed with a trustee during the spouse's life, that 
reasonable notice must be given, or that reasonable intervals must 
elapse between successive partial exercises. Examples of formal 
limitations

[[Page 617]]

on a power exercisable by will are that it must be exercised by a will 
executed by the donee spouse after the making of the gift or that 
exercise must be by specific reference to the power.
    (5) If the donee spouse has the requisite power to appoint to 
herself or her estate, it is immaterial that she also has one or more 
lesser powers. Thus, if she has a testamentary power to appoint to her 
estate, she may also have a limited power of withdrawal or of 
appointment during her life. Similarly, if she has an unlimited power of 
withdrawal, she may have a limited testamentary power.
    (h) Existence of a power in another. Paragraph (a)(5) of this 
section provides that a transfer described in paragraph (a) is 
nondeductible to the extent that the donor created a power in the 
trustee or in any other person to appoint a part of the interest to any 
person other than the donee spouse. However, only powers in other 
persons which are in opposition to that of the donee spouse will cause a 
portion of the interest to fail to satisfy the condition set forth in 
paragraph (a)(5) of this section. Thus, a power in a trustee to 
distribute corpus to or for the benefit of the donee spouse will not 
disqualify the trust. Similarly, a power to distribute corpus to the 
spouse for the support of minor children will not disqualify the trust 
if she is legally obligated to support such children. The application of 
this paragraph may be illustrated by the following examples:

    Example (1). Assume that a donor created a trust, designating his 
spouse as income beneficiary for life with an unrestricted power in the 
spouse to appoint the corpus during her life. The donor further provided 
that in the event the donee spouse should die without having exercised 
the power, the trust should continue for the life of his son with a 
power in the son to appoint the corpus. Since the power in the son could 
become exercisable only after the death of the donee spouse, the 
interest is not regarded as failing to satisfy the condition set forth 
in paragraph (a)(5) of this section.
    Example (2). Assume that the donor created a trust, designating his 
spouse as income beneficiary for life and as donee of a power to appoint 
by will the entire corpus. The donor further provided that the trustee 
could distribute 30 percent of the corpus to the donor's son when he 
reached the age of 35 years. Since the trustee has a power to appoint 30 
percent of the entire interest for the benefit of a person other than 
the donee spouse, only 70 percent of the interest placed in trust 
satisfied the condition set forth in paragraph (a)(5) of this section. 
If, in this case, the donee spouse had a power, exercisable by her will, 
to appoint only one-half of the corpus as it was constituted at the time 
of her death, it should be noted that only 35 percent of the interest 
placed in the trust would satisfy the condition set forth in paragraph 
(a)(3) of this section.

[T.D. 6334, 23 FR 8904, Nov. 15, 1958, as amended by T.D. 6542, 26 FR 
552, Jan. 20, 1961, as amended by T.D. 8522, 59 FR 9659, Mar. 1, 1994; 
T.D. 9102, 69 FR 21, Jan. 2, 2004]