Essay
The Marital Deduction a Widow Almost Lost to a Checkbox
What happens to a widow when the people she hired to protect her get one box wrong on a tax return?
That is not a hypothetical. It is the fact pattern behind a recent IRS private letter ruling, LTR 202629011, and it is worth reading closely — because the mistake was ordinary, the stakes were enormous, and the fix was never guaranteed.
What actually happened
A husband died. His estate plan routed property into a marital trust for his surviving spouse — the standard way to defer estate tax until the second death rather than pay it at the first. The wife, serving as executor, did what any careful person does: she retained an accounting firm and an attorney to prepare the federal estate tax return, the Form 706.
Somewhere in that preparation, the marital trust property was reported as something other than qualified terminable interest property. No election was made. And a marital deduction that should have been automatic was, on the face of the return, simply gone.
The rule, and why the stakes are this high
The marital deduction for a trust interest is not free. Under Sec. 2056(b)(7), property left to a spouse in trust normally fails the deduction because the spouse’s interest is a “terminable interest” — it ends at her death and passes to someone else. Congress carved out an exception for qualified terminable interest property, a QTIP, but the exception only applies if the executor affirmatively elects it on the return. Miss the election and the exception evaporates. The property is pulled back into the first spouse’s taxable estate, and estate tax that should have waited until the second death is accelerated to the first.
For a large estate, that is not a rounding error. It is a seven-figure swing produced by a box that was never checked.
The rescue: 9100 relief
The IRS granted the estate an extension under Reg. Secs. 301.9100-1 and 301.9100-3 — the discretionary “9100 relief” that lets a taxpayer make certain late elections when the failure was not a strategic hindsight play but an honest miss. The Service found what these rulings almost always turn on: the executor acted in good faith and reasonably relied on qualified tax advisors, and granting relief would not prejudice the government. The late QTIP election was allowed. The marital deduction was preserved. The widow was made whole.
That is the happy ending. It is also the trap.
The honest counterargument
The reassuring read is that the system worked. A good-faith mistake was correctable, the professionals owned it, the IRS was reasonable, and no family was ruined by a clerical slip. All true. But 9100 relief is discretionary, not a right — it costs the price of a private letter ruling, it takes months, and it depends on facts staying clean. Reliance on an advisor cures an innocent error; it does not cure a taxpayer who knew better, and it does not survive a record that looks like a second look after the numbers came in. Betting a marital deduction on the IRS’s mercy is not a plan. It is a rescue.
The fiduciary read
The cleaner practice was available the whole time: a protective QTIP election on a timely return. When there is any doubt about whether a trust needs the election, an executor can simply make it — the cost of an unnecessary election is close to nothing, and the cost of a missing one is the whole deduction. An executor is a fiduciary, and a fiduciary’s job is not to be rescued gracefully after a failure. It is to close the gap before it opens.
I learned that discipline in a different uniform, signing for equipment where the time to catch a shortage was during the count, not after. Estate administration runs on the same principle. The election you make defensively on a quiet afternoon is worth more than the ruling you chase after the return is filed and the surviving spouse is waiting to hear whether the plan her husband built still holds.
Source: IRS Grants Estate Late QTIP Election, Preserving Marital Deduction (Wealth Strategies Journal), reporting LTR 202629011. Educational only — not legal or tax advice.