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Id.2 With all due respect to the Court of Appeals for the Fifth
Circuit, I think that statement mischaracterizes the focus of
this Court. Contrary to such characterization, this Court
applies the standard espoused by the Fifth Circuit; the property
being tested for QTIP eligibility is the same property to which
the election made by the executor applies.
During the period from the testator's death to the time of
making the election, the executor possessed the power to appoint
the property for which the election was made to someone other
than the surviving spouse. The fact that the executor made the
election and, thus, did not in fact appoint the property to
someone other than the surviving spouse does not negate the fact
that, prior to making the election, the executor had the power to
appoint the property to someone other than the surviving spouse.
2 The Court of Appeals for the Fifth Circuit also focused on
this Court's language that the executor has the power to direct
the assets of Trust B (marital trust) to Trust A (children's
trust). The Fifth Circuit stated:
First, the QTIP election cannot vest the executor with
control over "trust assets" before they become trust
assets! The undivided interests in the * * *
[property] for which the election is made are estate
assets but they do not become trust assets until the
trust is funded, even though the economic effect of
funding is retroactive to the instant of death. Assets
used to fund each testamentary trust get there by
virtue of the provisions of the Will and the
administration of the estate. * * *
Estate of Clayton v. Commissioner, 976 F.2d 1486, 1499 (5th Cir.
1992), revg. 97 T.C. 327 (1991). I agree that the assets of the
estate are the proper focus of the determination. It is those
assets, however, over which the executor had the prohibited
power.
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