Which of the following is MANDATORY to qualify the general power of appointment (GPA) marital deduction trust?

• A. Right to encroach upon corpus of the marital deduction share by surviving spouse during lifetime.
• B. Ultimate distribution to decedent's heirs.
• C. All net accounting income paid at least annually to the surviving spouse and surviving spouse is given either lifetime GPA or testamentary GPA.
• D. Surviving spouse has the right to make gifts from the marital deduction share during lifetime.

Answer: (C)

The key idea being tested is how a general power of appointment (GPA) can be used in a marital deduction trust and what must be in place for that structure to qualify for the unlimited marital deduction. For the surviving spouse to have a true GPA over the trust assets, she must have a real, exercisable interest that can be used for her benefit. Giving her all net accounting income at least annually provides that present economic interest and keeps the power operative over time. If the spouse isn’t paid income regularly or the power isn’t clearly available either during life or at death, the arrangement may not function as a true GPA trust for tax purposes.

Allowing the surviving spouse to receive all net income each year shows she has a meaningful, ongoing stake in the trust’s assets. Coupled with the grant of a GPA that she can exercise either during her life (lifetime GPA) or by will at death (testamentary GPA), this ensures she holds a general power over the trust property. That combination is what makes the trust eligible for the federal marital deduction treatment, since a true GPA held by the spouse over the trust assets aligns with how the unlimited spousal deduction is intended to work.

The other options aren’t required for this qualification. Rights to invade principal aren’t necessary to establish the GPA in the marital-deduction context, and permitting ultimate distributions to the decedent’s heirs or giving gifts from the marital share aren’t the features that define the mandatory GPA setup. The essential elements are the annual income to the surviving spouse and the existence of a general power she can exercise (either during her lifetime or by testamentary power).