PLR 201216005: Estate Tax Deduction Issue for Altered Tenancy by the Entirety
In a Private Letter Ruling, the IRS determined that a tenancy by the entirety is broken when a "binding contract to change [any party's] legal rights and interests" is duly executed, and thus, Rev. Rul. 71-51 will not apply for purposes of the estate tax deduction for certain joint interests under I.R.C. §§ 2040 and 2056 in such instances. In the PLR, a couple holding a property in a tenancy by the entirety planned on executing an agreement that would form a testamentary trust for each spouse. The trust would hold the spouse's interest in the property upon that spouse's death. This, of course, would be different from the mechanism under a tenancy by the entirety, in which one spouse's death triggers full and absolute ownership for the surviving spouse. The PLR notes that Rev. Rul. 71-51 pertained to joint interests that were purportedly modified by wills. Of course, the absolute right of survivorship in a joint tenancy supersedes testamentary dispositions, and that wrinkle is what made the situation in Rev. Rul. 71-51 different from the one in the PLR.
See PLR 201216005. h/t: Tax Notes Today
Posted by Matthew Evan Rappaport, Associate Editor, Wealth Strategies Journal
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