2012 -- H 7659

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LC00899

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO TAXATION -- ESTATE AND TRANSFER TAXES

     Introduced By: Representatives Jackson, O`Neill, Gallison, Lally, and Keable

     Date Introduced: February 16, 2012

     Referred To: House Judiciary

It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 44-22 of the General Laws entitled "Estate and Transfer Taxes -

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Liability and Computation" is hereby amended by adding thereto the following section:

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     44-22-1.2. Construction of wills and trusts containing formula marital clauses. – (a)

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If a testator or settlor, under the terms of a governing instrument executed prior to September 12,

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1981, leaves outright to or in trust for the benefit of that testator’s surviving spouse an amount or

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fractional share of that testator’s or settlor’s estate or a trust estate expressed in terms of one-half

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of that testator’s federal adjusted gross estate, or by any other reference to the maximum estate

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tax marital deduction allowable under federal law without referring, either in that governing

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instrument or in any codicil or amendment thereto, specifically to the unlimited federal estate tax

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marital deduction enacted as part of the economic recovery tax act of 1981, such expression shall,

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unless subsection (b) or (c) of this section applies, be construed as referring to the unlimited

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federal estate tax marital deduction, and also as expressing such amount of fractional share, as the

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case may be, in terms of the minimum amount which will cause the least possible amount of

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federal estate tax to be payable as a result of the testator’s or settlor’s death, taking into account

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other property passing to the surviving spouse that qualifies for the marital deduction at the value

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at which it qualifies, and also taking into account all credits against the federal estate tax, but only

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to the extent that the use of these credits do not increase the estate taxes payable.

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     (b) If this subsection applies to a testator or settlor, such expression shall be construed as

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referring to the estate tax marital deduction allowed by the federal law immediately prior to the

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enactment of the unlimited estate tax marital deduction as part of the economic recovery tax act

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of 1981. This subsection applies if subsection (c) of this section does not apply and:

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     (1) The application of this subsection to the testator or settlor will not cause an increase in

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the federal estate taxes payable as a result of the testator’s or settlor’s death over the amount of

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such taxes which would be payable if subsection (a) of this section applied; or

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     (2) The testator or settlor amended the governing instrument containing such expression

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after December 31, 1981, without amending such expression to refer expressly to the unlimited

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federal estate tax marital deduction.

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     (c) If the governing instrument contains language expressly stating that federal law of a

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particular time prior to January 1, 1982, is to govern the construction or interpretation of such

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expression, the expression shall be construed as referring to the marital deduction allowable under

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federal law in force and effect as of that time.

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     (d) If subsection (b) or (c) of this section applies to the testator or settlor, the expression

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shall not be construed as referring to any property that the executor of the testator’s or settlor’s

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estate or other authorized fiduciary elects to qualify for the federal estate tax marital deduction as

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qualified terminable interest property. If subsection (a) of this section applies to the testator or

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settlor, any provision shall be construed as referring to any property that the executor of the

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testator’s or settlor’s estate or other authorized fiduciary elects to qualify for the federal estate tax

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marital deduction as qualified terminable interest property, but only to the extent that such

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construction does not cause the amount of fractional share left to or for the benefit of the

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surviving spouse to be reduced below the amount that would pass under subsection (b) or (c) of

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this section, whichever is applicable.

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     (e) This section is effective with respect to testators and settlors dying after December 31,

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1981.

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     SECTION 2. This act shall take effect upon passage.

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LC00899

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION -- ESTATE AND TRANSFER TAXES

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     This act would provide for the construction of wills and trusts executed prior to

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September 12, 1981 that contain marital deduction formula clauses in a manner that would

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provide for the optimum federal estate tax marital deduction. This would enable wills and trusts

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executed prior to September 12, 1981, to qualify for the unlimited Rhode Island estate tax marital

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deduction available after federal estate tax law permitted an unlimited federal estate tax marital

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deduction. Prior to September 12, 1981, wills and trusts using a formula clause that utilized the

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“maximum” or “optimum” marital deduction would obtain a marital deduction for one-half of the

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adjusted gross estate, the most permitted under federal law.

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     This act would take effect upon passage.

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LC00899

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